Draft Broad Default Definition for Your Leases

February 2, 2017
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Every lease gives an owner certain remedies, such as eviction or the collection of damages, that the owner can use if something the tenant does or fails to do fits the lease’s definition of an “event of default.” But what if your lease doesn’t clearly define what acts or omissions by the tenant are events of default? You could be powerless to do anything even though you think you should be allowed to use your remedies. To ensure that you have remedies against a tenant in situations where you need them—and the power to use them—make sure you include certain items in your definition of an event of default by the tenant in your lease. Among the most important items are these two:

  • Nonpayment. One of the most important events of default by a tenant is its failure to make payments required by the lease. This includes minimum rent, percentage rent, if applicable, and additional rent (such as operating expenses or CAM costs). You want to make sure the clause also defines an event of default to include the tenant’s failure to pay any other money due under the lease, for example, not reimbursing you for an insurance premium you pay on its behalf.
  • Chronic lease violations. Tenants often commit the same lease violation over and over but then cure the violation before it becomes an event of default. This can be costly and frustrating to you. To stop tenants from chronically committing lease violations, the lease can allow you to treat more than, say, two lease violations in any 12-month period as an automatic, noncurable event of default.

For eight more items to make your default clause fully comprehensive, see “Include 10 Items in 'Event of Default' Definition,” available to subscribers here.