Don't Let Tenant Ambush You with Default Claims

July 25, 2016

You might think that if you sue a tenant that has stopped paying rent and abandoned or been evicted from its space, it’s only fair that the tenant pays you what it owes in damages. If you’re surprised to find out that some tenants end up paying only a fraction or even none of the damages the owner requests, you’ve probably failed to include language in your lease that ensures you’ll be able to collect what you need to make up for the default.

You might think that if you sue a tenant that has stopped paying rent and abandoned or been evicted from its space, it’s only fair that the tenant pays you what it owes in damages. If you’re surprised to find out that some tenants end up paying only a fraction or even none of the damages the owner requests, you’ve probably failed to include language in your lease that ensures you’ll be able to collect what you need to make up for the default. Here’s how some tenants wriggle out of paying damages, and how you can plug the loopholes in your leases that might’ve allowed that situation to happen to you.

Savvy Tenants Use Element of Surprise

If a lease says nothing to the contrary, a tenant being sued can surprise you with a first-time claim that you defaulted on the lease. For example, a tenant could claim that you didn’t maintain the building. Instead of getting the full amount of damages you’re owed from the tenant’s default, the court might reduce the damages by the amount that your supposed default cost the tenant. Most owners aren’t trying to cheat their tenants by defaulting on the lease and yet collecting from a tenant that does the same. Typically, these surprise claims pop up over problems that owners weren’t even aware of. You can prevent a tenant from unfairly raising last-minute claims, though, by using lease language specifying that your failure to meet any of your lease obligations won’t be treated as a default unless the tenant has given you written notice of the problem and the chance to cure—that is, fix—it.

Get Time to Solve Problem

If you include a clause in your lease that gives you time to solve a problem on your end before your tenant can claim a default, you’ll have much greater certainty about the outcome when suing a that tenant for its own default. If the tenant hasn’t told you in writing beforehand about an unmet lease obligation, the tenant will have trouble raising it for the first time in the lawsuit. And the clause will place you in a stronger position whether your case goes to court or ends up being settled.

Ask your attorney about adapting the following language to prevent an “owner default” claim from being leveled without warning. Note that it gives you 30 days to fix the problem, which is commonly the amount of time that a tenant would get to fix a default, other than the nonpayment of rent.

Model Lease Language

Default by Landlord. Landlord shall only be deemed to be in default under the terms of this Lease in the event Landlord shall violate, neglect, or fail to observe, keep, or perform any covenant or agreement which is not observed, kept, or performed by Landlord within thirty (30) days after the receipt by Landlord of written notice by Tenant of such breach which notice shall specifically set out the breach. Landlord shall not be considered in default so long as Landlord commences to cure the breach in a diligent and prudent manner and is allowed such additional time as reasonably necessary to correct the breach.

 

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