Don't Renew Lease Without Release from Litigation

Suppose your lease doesn’t give a “problem tenant” a renewal option, but the tenant wants to stay in its space. You might be tempted to allow it to stay if the tenant is important to the synergy at your center or serves some important purpose in your office building. This is your chance to have a frank talk with the tenant to work out any problems you’ve had with it under the old lease and agree to a renewal—but only if the tenant agrees to change its ways. That is, you could tell the tenant that you’ll renew its lease, but only if it agrees to “release” you from—or drop—any lawsuits that it might start in the future or has initiated currently. That way, you can keep a valuable tenant and save yourself the hassle of finding a new one for the space. Plus, you’ll start out fresh, with no legal problems carried over from the tenant’s old lease if that’s the case.

To do this, make the tenant’s release as broad as possible by making sure the release covers all types of claims, lawsuits, and arbitrations stemming from the previous lease, including those already in progress. You should also make sure that the release not only protects you but also protects your employees and agents. To get this protection, you can add the following language to the new lease or lease amendment, whichever you use for the renewal:

Model Lease Language

Tenant hereby waives and releases all demands, charges, claims, accounts, or causes of action of any nature against Landlord or Landlord’s employees or agents, including, without limitation, both known and unknown demands, charges, claims, accounts, and causes of action that have arisen out of or in connection with the Prior Lease.

Be aware that a savvy tenant may point out that, while it’s releasing you from having to deal with various problems stemming from the old lease, it still expects you to fulfill certain promises you may have made under that lease. For instance, under the old lease you may have agreed to repave the parking lot, but didn’t get around to doing so. This is a fair point—and one you should probably agree to.