Section 8 Defaults

• Library: Real Estate Leasing and Landlord-Tenant Actions and Remedies 2011

Default provisions in many leases are limited to defaults on the part of the tenant. This is likely the case because the tenants have more obligations under leases than landlords and because landlords generally control the content of the lease. When representing a tenant, counsel should consider whether the lease should include default provisions to deal with failure by the landlord to comply with its obligations.

The tenant default that is the most common concern for landlords is a default in the payment of rent. The consequences of this default are immediate, acute, and serious. The rent may be required for the discharge of the landlord’s mortgage obligations, and the tenant may be faced with losing the property in which the tenant’s business is conducted. The lease should provide for prompt payment of rent after notice, but the tenant should not be automatically cut off without some opportunity to cure a default in payment of rent. Defaults in tax and insurance payments and other duties that the tenant can cure by the payment of money should be curable within a short time after notice. Counsel for the landlord and the tenant should recognize that a payment default is a matter of major importance. See Premier Golf Mo., LLC v. Staley Land Co., 282 S.W.3d 866, 873 (Mo. App. W.D. 2009), discussing factors for determining whether a breach is material, including:

the hardship on the breaching party;

whether substantial benefit of performance would be received by the nonbreaching party; and

the adequacy of an award of damages for partial breach to the nonbreaching party.

The court also held that materiality of breach is a question of fact.

The parties may provide that defaults that cannot be cured by the payment of money, such as those relating to maintenance, repairs, and excessive or unauthorized use of the premises by the tenant, will enable the other party to pursue its remedies only if not cured after notice (30 days is common) and failure to correct the default within the specified notice period. A lease may also provide that, if the actions necessary to cure the default cannot by their nature be completed within 30 days, the defaulting party will be deemed to have complied if the necessary action to cure the default is begun within the specified time and thereafter pursued to completion with due diligence. This type of provision is essential when one of the parties may be required to repair or rebuild a structure in whole or in part. On the other hand...