Make Sure Subtenant Waives Its Right to Jury Trial

If you and a tenant wind up in court, it's usually to the tenant's advantage to have a jury—not a judge—decide the dispute. That's because juries are typically biased against the owner. Therefore, if your lease is like most, you've included a protective clause that requires the tenant to waive its right to a jury trial.

You might assume that this jury trial waiver clause will also protect you if there's a dispute between you and a subtenant—that is, the clause will also bar the subtenant from demanding a jury trial. But that's wrong. If the jury trial waiver clause in your lease isn't worded properly, it won't apply to subtenants.

New York Owner Is Subject to Jury Trial

For example, a subtenant sued a New York owner and demanded a jury trial. The owner argued that the subtenant had waived its right to a jury trial. The owner pointed out that the prime lease said that the tenant waived its right to a jury trial in all disputes against the owner. The owner also noted that the sublease had a general incorporation clause—which said that the sublease “is subordinate to all of the terms, covenants, and provisions contained in the Prime Lease.” So the owner argued that the waiver applied to the subtenant too.

A federal court ruled that the subtenant hadn't waived its right to a jury trial in disputes against the owner. The court said that a jury trial is a “fundamental right.” And because the lease didn't say specifically that the jury trial waiver applied to the subtenant, the sublease's general incorporation clause wasn't good enough to waive the subtenant's fundamental right, the court said [Urban Outfitters Inc. v. 166 Enterprise Corp., April 2001].

Add Lease Language

To make sure that you don't have a similar situation, have the jury trial waiver clause in your lease state that it applies to the tenant and any subtenant, recommends New Jersey attorney Marc L. Ripp. And to cover all bases, state that the tenant's assignees and successors also waive their right to a jury trial in all disputes against you, he adds. That way, there's no question that the subtenant is barred from demanding a jury trial, he explains.

To do this, use the following language to replace the language waiving jury trials in your current clause:

Model Lease Language

Tenant and all of Tenant's successors, subtenants, and assignees (collectively, for the purposes of this Paragraph [insert #], “Tenant”) shall, and does hereby, waive trial by jury in any action, proceeding, or claim brought by or against Landlord on any matters arising out of, or in any way connected with, this Lease, the relationship of Landlord and Tenant, or Tenant's use or occupancy of the Premises.

Insider Source

Marc. L. Ripp, Esq.: Sr. Assoc. General Counsel, Mack-Cali Realty Corp., Mack-Cali Centre II, 650 From Rd., Ste. 220, Paramus, NJ 07652-3517; (201) 967-0324; mripp@mack-cali.com.