Traps to Avoid

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When you renew a lease that includes a guaranty from the tenant’s business principal or another third party, you might assume that the guaranty will automatically continue into the renewal term. But if you don’t get the guarantor to sign off on the renewal lease, you may be unable to hold the guarantor accountable for defaults the tenant commits during the renewal term.

It’s hard to determine today how much rent to charge a tenant for a lease renewal (or extension) that won’t happen until years later. It may be tempting to skirt this problem by providing for the renewal at an unspecified rent “to be negotiated” or “agreed to” in the future. Agreeing to agree is fine as long as you actually do reach an agreement at renewal time. But if you don’t and the dispute lands in court, the party seeking to enforce the renewal provision may find itself out in the cold.   

The rule of “anticipatory breach” gives you the right to take immediate legal action against tenants that no longer intend to fulfill their remaining obligations under the lease. The catch: The tenant must make it crystal clear, whether by words or by actions, of its intent to bail on the lease. On its face, vacating the premises mid-lease seems like the kind of thing that would give a landlord solid grounds to claim anticipatory breach. But that’s not necessarily the case.

When you sue tenants for not paying rent, there’s a pretty good chance they’ll counter with a “constructive eviction” claim. The argument: We don’t owe you rent because you constructively evicted us. To win the claim, tenants must prove that you did (or omitted to do) something that substantially interfered with their lease right to quiet enjoyment. That’s not easy. Mere inconvenience isn’t enough.