Lessor’s Rights When Lessee Breaches the AIR Lease

If Lessee does not perform an obligation in the AIR Lease, Lessee typically has the right to cure its Default.  However, if it fails to cure on time (or if the Default cannot be cured), Lessor may terminate Lessee’s right to possession of the Premises and require Lessee to pay Lessor all of the following 9 items:

  1. Brokerage commissions applicable to the unexpired term of the Lease.
  2. Rental loss for the period of time prior to termination of Lessee’s right to possession.
  3. Rental loss for the remainder of the lease term (however, Lessor must attempt to promptly lease the Premises to another party).
  4. Free rent previously enjoyed by Lessee (Paragraph 13.3). (When Free Rent Is No Longer Free).
  5. Other concessions given to Lessee, which may include the cost of tenant improvements or the value of a tenant improvement allowance (Paragraph 13.3). (When Free Rent Is No Longer Free).
  6. Cost of recovering possession of the Premises.
  7. Lessor’s expenses of reletting, including necessary renovation and alteration of the Premises.
  8. Reasonable attorneys’ fees incurred by Lessor.
  9. Any other amount necessary to compensate Lessor for all the detriment proximately caused by Lessee’s Breach.

These remedies are set forth in Paragraph 13.2, except as noted above.  Whether Lessor will be able to recover the amounts described above depends, of course, on whether Lessee (or any Guarantor) has sufficient assets and/or an ongoing profitable business.

In addition to the remedies listed above, the AIR Lease provides for specific remedies for certain Defaults by Lessee.  For example, if Lessee fails to deliver a tenant estoppel certificate within 10 days, the Base Rent increases by 10% (Ignore Estoppel Certificates At Your Peril).  In addition, if Lessee fails to pay an amount within five days after it is due, a 10% late charge is incurred (Paragraph 13.4).

If Lessee fails to cure a Default, the AIR Lease does not require Lessor to terminate Lessee’s right of possession and re-let the Premises to another tenant.  The AIR Lease permits Lessor to continue the Lease and recover Rent as it becomes due (Paragraph 13.2(b)).  Lessors sometimes consider this option in the unusual situation where Lessee has abandoned the Premises and Lessor nevertheless believes Lessee (or any Guarantor) is creditworthy.

Do you have comments or questions about landlords’ remedies under the AIR Lease?  Post below.

By | 2018-01-31T21:05:48+00:00 April 12th, 2016|Landlord-Tenant|0 Comments

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