New Language Makes Tenant Responsible for All Default-Related Costs

Recently, we told you how to prevent a tenant from getting off the hook completely after it defaults and pays accelerated rent. In “Keep Tenant Responsible for Default-Related Costs” (CLLI, Aug. 2006, p. 4), we gave you Model Lease Language that would require a tenant to reimburse the costs you incur because of its default. After reading the Model Lease Language in that article, CLLI subscriber and Cleveland attorney Marc Alan Silverstein noticed a loophole and contacted us about it.

Get Reimbursed for Costs Relating to Default Itself

Silverstein told us that our Model Lease Language could go further to fully accomplish the goal of making a tenant responsible for all of its default-related expenses. The Model Lease Language made a tenant responsible for “any expense incurred by Landlord in connection with reletting” the tenant's space. However, Silverstein pointed out, “reletting” expenses are only a subset of default-related expenses.

For example, a tenant could argue that the Model Lease Language entitles the owner to recover attorney's fees relating only to reletting the tenant's space—not for attorney's fees arising from or relating to the default itself, he says. Costs relating to the default might include fees covering communications with the tenant and drafting an eviction complaint, he explains.

To prevent the tenant from making that argument, Silverstein suggests expressly stating in the lease that the tenant must reimburse you for any costs and expenses that you incur “relating to or arising from” the tenant's default. Then, list some examples of those costs and expenses— such as the costs incurred to relet the space, pay brokerage commissions, and cover advertising costs. With Silverstein's new language added in italics, here is what your lease should say:

Model Lease Language

Tenant shall reimburse Landlord for any costs and expenses incurred by Landlord relating to or arising from Tenant's default, including, but not limited to, attorney's fees and disbursements; costs incurred to relet the Premises, pay brokerage commissions, and cover advertising costs; costs incurred to secure the Premises; and the cost of preparing the Premises for reletting, including, but not limited to, the cost of making repairs, alterations, replacements, and decorations to the Premises as Landlord may consider desirable or necessary.

Show this language to an attorney before using it in your lease.

CLLI Source

Marc Alan Silverstein, Esq.: Counsel, Jones Day, North Point, 901 Lakeside Ave., Cleveland, OH 44114-1190; (216) 586-7125; msilverstein@JonesDay.com.