Must Your Tenant Fully Fix Cause of Breach?

Most leases include a “cure period” during which a tenant has the opportunity to fix a problem that, if left unchanged, would be considered a breach of that lease. If you’ve allowed your tenant to have a cure period, you might be under the impression that it’s required to completely fix whatever is wrong. But that’s not always the case. A Nebraska trial court recently determined that a national pet product retail tenant had made “adequate” repair efforts during the cure period, which were enough to prevent the owner from suing.

In that case, the tenant received a notice of default and termination from the owner of the space it rented. The owner alleged that the tenant had failed to perform its maintenance obligations under the lease, most notably, failing to fix a large crack in a wall, which entitled the owner to terminate the lease. But the tenant argued that the lease terms allowed a cure period—that is, a period of time after it received the default notice during which it could perform the repairs. The owner and tenant each asked a trial court for a judgment in its favor without a trial.

A Nebraska trial court ruled in favor of the tenant. The trial court said that the owner couldn’t demonstrate that the tenant had defaulted on its obligations and failed to cure its default after notice, which were both necessary for termination. The district court stated that even if, for argument’s sake, the maintenance breach was sufficient to trigger the termination clause, the tenant had, during the cure period after it received the default notice, diligently pursued making repairs. There was evidence that it had created work orders within its own company to fix some items and had hired outside contractors when it was necessary [Petco Animal Supplies Stores, Inc. v. The Five Fifty Two Corporation, January 2016].

So before signing a lease with a new tenant, ask your attorney about how you can draft this provision so that a tenant must make more than just adequate efforts to fix a breach during a cure period.