In a typical commercial lease, the landlord will reserve the right to accelerate the tenant’s lease obligations in the event of a material default and eviction. This means that, upon issuing a declaration of material default or issuing an eviction notice, the landlord can also seek immediate payment of all future amounts owed under the rental provisions of the lease. However, there are certain exceptions, and the exercise of a landlord’s right to accelerate rent is often fertile grounds for litigation – particularly where the alleged default is in dispute or the tenant has defaulted on its rent obligations due to an inability to pay.
One seemingly-obvious exception is where the lease does not actually include an enforceable accelerated rent provision. Tenants with sufficient leverage may be able to negotiate these provisions out of their agreements, and ambiguity can lead to unenforceability – particularly in archaic lease forms that rely on outdated legalese. In some cases, disputes over accelerated rent will begin with questions of whether there is even a dispute to be had at all.
Another exception exists where the landlord retakes possession of the leased premises for its own account.
The Landlord’s Options Upon Default and Their Impacts on Rent Acceleration
When a tenant defaults under a commercial lease, the landlord has three basic options under Florida law. The landlord can either:
- Evict the tenant, terminate the lease and take possession of the premises for its own account;
- Evict the tenant without terminating the lease, and take possession on the tenant’s account; or,
- Not evict and continue to hold the tenant liable for its contractual obligations under the lease.
Each of these options has its own implications for the acceleration of rent. With the first option, the Florida courts have held that taking possession for the landlord’s own account has the effect of waiving the landlord’s right to accelerated rent. With the third option, the landlord can generally seek to enforce the tenant’s obligation to pay rents accrued, but cannot accelerate the tenant’s future rent obligations. It is the second option where Florida law recognizes a right to accelerate rent (once again, assuming the lease includes an acceleration clause). However, even here, the landlord has an obligation to attempt to re-let the premises; and, once a new tenant has been secured, the defaulting tenant’s accelerated rent obligations are subject to offset by the new tenant’s paid rent.
The risk of rent acceleration for tenants (and the risk of losing the right to accelerate rent for landlords) is a critical issue to consider when facing a potential default under a commercial lease. Mandatory arbitration, jurisdiction and venue, and other pertinent negotiated provisions will also require careful consideration. Tenants may also need to consider the impact of a possible termination or eviction on any other business relationships (such as a franchise agreement) as well.
Speak with a Real Estate Litigation Attorney in Fort Lauderdale, FL
Our real estate attorneys provide experienced representation for commercial landlords and tenants in South Florida. If you are facing a commercial lease dispute and need legal advice, you can call (954) 767-9662 or contact us online to schedule a confidential consultation.