Renew Lease Only if Tenant ‘Releases' You from Lawsuits

August 31, 2004

Suppose your lease doesn't give a tenant a renewal option, but the tenant wants to renew its lease anyway. You know that this tenant has been a “problem tenant” during its lease—for example, you may be embroiled in a lawsuit started by this tenant. But you still may be interested in renewing the tenant's lease. Now 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.

Suppose your lease doesn't give a tenant a renewal option, but the tenant wants to renew its lease anyway. You know that this tenant has been a “problem tenant” during its lease—for example, you may be embroiled in a lawsuit started by this tenant. But you still may be interested in renewing the tenant's lease. Now 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 it has started against you, advises Chicago attorney Edward A. Chupack. This way, Chupack says, you won't have to look for a new tenant for the space. Plus you'll start out fresh, with no legal problems carried over from the tenant's old lease, he adds.

What Release Should Cover

You want to make the tenant's release as broad as possible, Chupack advises. So you need to make 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: CLLI0039

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.

Practical Pointer: 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, says Chupack.

CLLI Source

Edward A. Chupack, Esq.: Regional Counsel, Equity Office Properties Trust, 2 N. Riverside Plz., Chicago, IL 60606; (312) 466-3300.

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