Should You Agree to Tenant's 'Drop-Dead Delivery Date' for Possession?

Should You Agree to Tenant's 'Drop-Dead Delivery Date' for Possession?



When a tenant insists on having its space delivered by a "drop-dead date" it has the potential to expose you to a variety of draconian consequences if the date isn’t met. That's why negotiations over this request are extremely important. If you don't carve out rights for yourself, you could end up giving the tenant free rent, or worse, suffering significant monetary penalties, and even the ability for the tenant to terminate the lease agreement. Do the following when you're met with such a demand:

Weigh pros and cons of granting tenant’s request. When the tenant proposes a drop-dead date, it puts the landlord’s investment return at risk. And with respect to a right to terminate, it opens up the possibility that the landlord will never obtain a return on the investment dollars expended. As a result, it’s quite reasonable to ask if providing the tenant with a drop-dead date is worth the risk. The answer, as usual, is: It depends. And initially, it boils down to a business decision, not a legal one.

Take into account reasons for deadline. Ask why the tenant’s particular drop-dead date is critical. Maybe the expiration date for the tenant’s existing lease is fast approaching and the tenant will incur stiff “holdover” penalties if it hasn’t vacated by the drop-dead date. Maybe the tenant has a seasonal business model (think tax preparation or Christmas for retailers) and the tenant would incur unthinkable business losses if it isn’t operational by the drop-dead date. This is important because you don't want to be pressured by confusing the tenant's time frame for your own. You didn’t cause the crisis, if there is one, and you shouldn’t be penalized as a result. Most likely, the tenant itself didn’t leave sufficient time to search for new space, negotiate a new lease document, and allow for potential construction time.

Ask whether the tenant’s proposed time frame is realistic. Putting aside fault, the most critical question to consider is if the time frame proposed by the tenant is realistic. Is there sufficient time for the landlord to complete its responsibilities before penalties come into play? Defining the landlord’s responsibilities is more complicated than it seems.

If you agree to a drop-dead date, it's crucial to protect yourself by considering putting restrictions on this type of deal.

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