Add Six Remedies to Discourage Chronic Lease Violations

It's exasperating to have a tenant that commits the same lease violation over and over but always cures—that is, fixes—the violation before it becomes a lease default. Some typical chronic lease violations are late rent payments, loud music that disturbs neighboring tenants, and improper disposal of trash.

The worst thing about chronic lease violations is your inability to break the cycle: You waste time and money hounding the tenant to cure its violations. But you can't sue the tenant for damages or try to evict it, because it cures the violation before the violation becomes a “default.” And even if you could evict the tenant, you may not want to in many cases because the tenant might be an asset to your building or center.

To help you break the cycle of chronic violations or prevent it from ever starting, CLLI, with the help of Spiegel Associates CEO, Alan Eidler, Toronto attorney Harvey M. Haber, and New Jersey attorney Marc L. Ripp, has put together a list of six lease remedies that will discourage a tenant from chronically violating the lease. These remedies are in addition to any other remedies that the law or the lease may give you. There's a Model Lease Clause on p. 3 that you can adapt and use and that includes these remedies.

Six Additional Lease Remedies

Say in the lease that if the tenant commits the same lease violation more than a certain number of times—for example, more than once—within a 12-month period, you can resort to one or more of the following six remedies, whether or not the tenant cures the violations:

* Increase Security Deposit

Get the right to increase the security deposit, says Haber. To add teeth to this remedy, don't put a specific dollar increase in the lease, says Ripp. Instead, get the right to increase the security deposit up to, say, three times the current monthly “Rent” (which should include minimum rent and additional rent), he says. This should let you raise the security deposit enough to cover the type of violation. And require the tenant to pay the security deposit increase on your demand, adds Haber [Clause, par. a].

Practical Pointer: If you use this remedy, check with your attorney before you set the increase, Ripp says. If the increase is too high, a tenant could challenge it as an unenforceable penalty.

* Charge Violation Fee

Get the right to charge the tenant a “violation fee,” starting with the second lease violation and each time thereafter, says Eidler (assuming the chronic violations remedies are triggered after more than one violation). So, the tenant's slate isn't wiped clean at the end of any 12-month period. Rather, the tenant must pay a violation fee for each additional violation committed during the remainder of the lease, he explains.

Set the violation fee amount in the lease, says Eidler. And check the amount with your attorney so that it's not challenged as an unenforceable penalty, he warns.

You may also want the right to increase the violation fee each time the tenant commits an additional violation, says Eidler. The violation should increase by a set percentage—say, 25 percent—for each violation, he says [Clause, par. b].

Practical Pointer: Call the violation fee “additional rent,” Eidler advises. This way, you'll have an easier time suing the tenant if it doesn't pay the fee, he explains.

* Cancel Tenant's Perks

Give yourself the right to cancel a tenant's lease perks—that is, its special lease rights or options, such as an exclusive or renewal option, says Ripp [Clause, par. c]. If the tenant knows that it could lose these perks, it will think twice about chronically violating the lease, he says.

* Require Advance Rent Payments

Get the right to require that the chronically violating tenant pay you rent in advance—say, in quarterly installments, says Ripp. And make this a remedy only for chronic late rent payments [Clause, par. d]. This remedy has the effect of bringing you one month's rent on time and two months' rent paid in advance. Getting advance rent payments lets you earn additional interest (if you promptly deposit them in the bank) and pay off building costs or loans sooner, he explains.

* Impose Automatic Rent Payment Program

Get the right to require the tenant to pay rent, additional rent, and any other lease charges by automatic transfer, says Haber. This is another remedy to use when the tenant's chronic lease violation is failure to pay its rent on time [Clause, par. e].

Practical Pointer: You'll need to set up an automatic rent payment program under which rent and all other money due is automatically deducted from the tenant's bank account on a specified day—say, the first of the month—and automatically transferred into your bank account, says Ripp.

* Make Chronic Violations an ‘Event of Default’

Tenants often become chronic violators because they know that by curing each violation on time, they escape your “events of default” clause, says Ripp. Take this escape hatch away. Give yourself the right to declare a noncurable “event of default for chronic violations,” he says. Then you can use any of the remedies available to you in the lease's remedies clause, he says. So, for example, you may be able to evict a chronic lease violator if you want to [Clause, par. f].

Expect a savvy tenant to try to make you limit your right to declare an event of default to monetary violations—such as the nonpayment of rent, adds Haber.

Practical Pointer: Don't limit your right to use these additional remedies to “material” lease violations, says Haber. You and the tenant could end up arguing over which violations are material and which aren't, he warns.

CLLI Sources

Alan Eidler, Esq.: CEO, Spiegel Assocs., 375 N. Broadway, Jericho, NY 11753.

Harvey M. Haber, QC, LSM: Partner, Goldman, Sloan, Nash & Haber LLP, 250 Dundas St. W., Ste. 603, Toronto, ON M5T 2Z5; (416) 597-3392.

Marc L. Ripp, Esq.: General Counsel, The Gale Company, 200 Campus Dr., Ste. 2000, Florham Park, NJ 07932; marc.ripp@thegalecompany.com.