Commercial Leasing

Litigation, arbitration and mediation (declaratory relief, specific performance, injunctions, and damages) of disputes over contract interpretation, performance, breach, damages, and case/code law

Author:  CEB Commercial Leasing Series — Office Leasing, Drafting and Negotiating the Lease.  Chapters on defaults and remedies, dispute resolution and attorney’s fees, compliance with laws, late payment, and landlord’s right to cure defaults.

Panelist:  Continuing Education to the Bar, International Council of Shopping Centers, Institute of Real Estate Management, Building Owners and Managers Association, Los Angeles County Bar Association, CLE International, and Lorman Education, programs — evictions, landlord-tenant litigation, premises liability, commercial lease litigation and bankruptcy, regulating expressive activities (public forum use), default and remedies clauses in commercial leases

Amicus Brief:  Carma Developers v. Marathon Development (1992) 2 Cal.4^th 342 — California Supreme Court case which resolved conflicts between express restrictions on right to assign and sublease and obligations imposed by implied covenant and good faith dealing.

Resolving Commercial Lease Disputes

Mr. Lines has substantial experience in representing both landlords and tenants in disputes over the following provisions: 

• Landlord delivery of possession and Landlord construction — scope of obligations and enforcement
• Tenant improvement construction and Tenant Improvement Allowance — scope of obligations and enforcement
• Lease commencement and lease expiration —scope of obligations and enforcement
• Rent commencement, Tenant offsets, CPI increases — scope of obligations and enforcements
• Percentage rent — sales included, records, auditing, reporting and paying
• Radius clauses — respective rights and obligations, and enforcement
• Use clauses — scope, restriction vs. permissive use, unconditional restrictions vs. restrictions without landlord consent, case/statutory law constraints
• Exclusive clauses and other restrictive right to lease covenants — scope and enforcement
• Compliance with laws clauses — Case law modifications of such clauses
• Co-tenancy clauses — respective rights and obligations, and enforcement
• Continuous operation clauses — scope, commencing cure, actual and liquidated damages, and injunctions
• Repair and maintenance clauses — Landlord or Tenant liability, repair vs. replacement obligations
• Landlord common area maintenance obligations — roofs, parking lots, ingress and egress including parking, customer use, tenant use, kiosks, taxes and assessments, insurance, regulation of public forum uses
• Tenant payment of common area maintenance expenses — audits, supervision fees, capital improvements, pro-rata share, budgets, estimated payments, and reconciliations
• Alterations and improvements — exterior signs, interior storefront signs, request and approval/rejection procedures
• Assignments and subleases — change of ownership, request procedure, approving or rejecting requests, lease and case /statutory law constraints
• Insurance — Landlord vs. Tenant insurable interests and obligations, conflicts between required and available insurance, waiver of insured claims, payment of first party claims, and defense and indemnity for third party claims
• Surrender —ordinary wear and tear, Landlord options to require removal and restoration, Tenant holdovers to complete required work
• Destruction and restoration — respective rights and obligations, and enforcement
• Constructive eviction —contract and case/code law constraints, claim procedure and requirements
• Default and notice clauses — time to cure, notice procedure, commencing without completing cure, interest and late charges, waiver clauses, case/statutory law constraints, Landlord self-help, Landlord liens, arbitration and mediation, jury waiver

Drafting Commercial Leases

Mr. Lines’ practice includes drafting or re-drafting default and remedy provisions in lease forms.

California code and case law provide useable material terms and conditions for the grant of a leasehold interest in real property.  Today, leases are as long as they are because landlords and tenants, and their brokers and attorneys, have improved upon the terms and conditions provided by the California code and case law.  Nevertheless, there have been surprisingly few improvements on the terms and conditions of the default and remedy provisions.

Yes, everyone knows that there is an unavoidable risk of a material breach, but the perceived risk is a theoretical one.  The contracting parties and their attorneys, therefore, typically pay little attention to the default and remedy provisions in a commercial lease.  But, a litigator’s world is full of material breaches and problems caused by the vagaries of the code and case law and outdated default and remedy provisions.

Mr. Lines typically drafts or re-drafts the following provisions:

• Waivers — landlord accepts rent without waiving claims, tenant waiver of constructive eviction claims, landlord and tenant waiver of jury trials
• Notices — number and content
• Service of Notices — replace the code requirements with the contract requirements, use newer methods of service, eliminate the problematic methods of service, stipulate to the admissibility of overnight courier delivery receipts
• Curing defaults — provide a manageable commencement and diligent completion rights and obligations
• “Event of Default” — define as a condition precedent to exercising remedy or condition precedent to the existence of a default
• Attorney’s Fees — provide liquidated damages to recover legal expenses without the necessity of litigation and post-judgment motion for an award, and provide guidelines for awarding legal expenses
• Method of dispute resolution — require mediation, arbitration, appointment of a referee, or temporary judge

Example of an “improved” service of notice provision:

All notices required by this Lease, or any code, ordinance, regulation, or other law, shall be served by hand delivery of the notice to a responsible adult on the Premises during normal business hours, or by overnight courier delivery to the Premises.  If this Lease requires the service of a notice on other person(s) at other address(s), such notices shall be served by overnight courier on such person(s) at such address(es).  The service of a notice as required by this Lease shall satisfy any and all service of notice requirements in any and all codes, ordinances, regulations, or other laws, and the parties waive any and all rights to require the service of a notice in another manner.  The parties may document the service of a notice by overnight courier with a copy of the tracking and/or delivery report on the website maintained by the overnight courier service, and the parties stipulate to the admissibility of a true and correct copy of such website information.  This provision does not apply to the service of a legal action or other proceeding, or the service of notices or other documents in any legal action or proceeding.