Require Tenant Notice of Default to Avoid Surprise Claims in Court
Litigation is a big hassle, and when you resort to it you want to be sure you collect as much as possible from tenants who have left the space and are no longer paying rent. But your lease may have a loophole that defaulting tenants can rely on to get a court to reduce or even eliminate their debt. The loophole isn’t what the lease says but what it doesn’t say—namely, with regard to the tenant’s right to raise surprise, first-time claims that the landlord defaulted by failing to maintain the premises or deliver the services the lease requires.
Defaulting Tenants Turn the Table on Landlord
The source who suggested that we warn you of this pitfall is a Houston attorney whose landlord clients got the rug pulled out from under them on two different occasions. In each case, the defaulting tenant being sued claimed that the landlord failed to meet its lease duty to repair the roof. Neither of the tenants uttered a single word about the roof to the landlord while they were in possession. The first time they raised the issue was in court as a defense to the landlord’s collection case. But while it came as a surprise to the landlord, the tactic was highly effective, resulting in a significant reduction of the tenant’s damages in one case and a less than satisfying out-of-court settlement in the other.
Limit Tenant’s Right to Raise Surprise Claims
The Houston attorney inherited the leases that led to his client’s undoing in the roof leak cases. And he resolved never to let it happen to any of his clients again. To that end, he crafted a clause, like our Model Lease Clause: Get Chance to Correct Problems Before Tenant Can Claim Default, to plug the loophole by specifying that a landlord’s failure to meet any of its lease obligations may not be treated as a default unless the tenant first provides the landlord written notice of, and an opportunity to fix, the problem.
In addition to preventing landlords from being ambushed in court while seeking to collect unpaid rent and other charges from a defaulting tenant, the clause helps in the effort to provide better maintenance, services, and tenant relations by requiring tenants to point out problems and ensure they get resolved without being allowed to fester into larger issues or nasty grudges.
One of the beautiful things about the lease clause is that tenants are likely to embrace it as something positive and to their own advantage. “It’s a win-win,” explains the attorney. “Tenants see not the litigation implications but rather how the clause holds the landlord accountable for providing the required level of maintenance and service.”
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|Get Chance to Correct Problems Before Tenant Can Claim Default|