Events of Default

Certain “events” may constitute a default of your lease. As a tenant, you should expect these clauses to cover financial distress and avoid any impact when your company is perfectly healthy. For example, when you move out for a more spacious area next door and are trying to sublease your old office, it should not be defined as abandonment as long as you continue to pay rent.

If an event prohibited by the lease occurs, the tenant should get written notice and a chance to “cure” the infraction before the landlord can take action to recapture the space.  Ten days notice should be given if the infraction involves money and thirty days if it involves any other obligation. And the thirty-day notice period should be extended if you are diligently trying to cure the infraction.

If a legitimate default occurs, the landlord should be able to re-let the space and charge you for the cost incurred as well as any lost rent.  However, your lease should prohibit them from giving a deep discount and passing on the difference to your damages calculation. You should check state regulations to determine if the landlord is required by law to take reasonable steps to mitigate or minimize the loss attributable to your default.  Lastly, some landlords want a right to accelerate all future rent and make it your obligation to pay. Any such clause should include an interest rate as a discount factor, obligating you to pay the present value of the future rental stream.