Commercial Landlord Must Wait Out 12 Year Lease Term To Recover For Tenant’s Early Termination In a decision which underscores the importance of careful commercial lease drafting, the Massachusetts Appeals Court has ruled that under a standard form default indemnity provision in a commercial lease, a commercial landlord must wait out the end of a 12 year lease term to recover unpaid rent from a tenant who abandoned the premises in Year 2 of the lease. Dental Practice Goes South Quickly The landlord and tenant entered into a 12-year lease beginning April 13, 2006, and ending April 16, 2018.
For example, if your yearly lease ends on June 30, you have to give the landlord a written notice before June 1 that you plan to terminate the lease on June 30. You will, however, be subject to eviction for refusing to sign a new lease. Moving out before the lease ends If you move out before the end of the lease, the landlord may be able to hold you responsible for the rent that becomes due until the apartment or house is rented again, or until the lease ends.
The reasoning underlying this legal tenet is that such liability is ultimately “contingent upon events thereafter occurring, because the full amount which the lessee eventually must pay for the remainder of the term cannot be wholly ascertained until the period ends.” Although somewhat reluctant, the Court was bound to follow the law in this instance: We are cognizant of the concerns raised by this long-established rule barring recovery until the end of the original lease, given the possible intervention of factors, presently unknown, that make the determination of damages uncertain at the present.
We also recognize the possibility that this rule, which forces this landlord to wait until 2018 to determine post-termination damages, may in effect make it impossible for the landlord to recover its true damages from this corporate tenant or guarantor, because of the protections afforded by legal processes, such as dissolution or bankruptcy.
If the LESSEE shall default, after reasonable notice thereof, in the observance or performance of any conditions or covenant on LESSEE’s part to be observed or performed under or by virtue of any of the provisions in any article of this lease, the LESSOR, without being under any obligation to do so and without thereby waiving such default, may remedy such default for the account and at the expense of the LESSEE.
Indemnity Provision Lacking The problem is that under Massachusetts law, recovery under an indemnity clause of a lease cannot be had until the specified term of the lease has ended.