Rent Abatement Clauses In Commercial Leases Can Provide Traps For Unwary Tenants
Negotiating a commercial lease can be complex. Commercial leases require tailored contracts benefitting both sides in a landlord-tenant agreement. One aspect of commercial leases that is often negotiated, rent abatement, can negatively impact a tenant if not negotiated carefully.
In broadest terms, rent abatement allows a tenant to forego rent payments after damage to the property. The rationale is that much of the damage done by storms and fires are paid for by the landlord’s insurance. Additionally, the property inside the commercial space is usually covered under renter’s insurance. Since both parties have insurance coverage, an abatement allows a suspension of the agreement should unforeseen damages occur. Once sufficient time has passed to allow for reconstruction, the lease resumes.
What to watch out for in rent abatement provisions
While simple on its surface, there are still nuances to appreciate when negotiating rent abatement provisions. For example, commercial landlords often attempt to include a provision that nullifies rent abatement if the damage is caused by the tenant or the tenant’s negligence. Such damage could include accidental fires or damages done by an employee. And because fires are almost always the result of negligence, it can be very detrimental to the tenant to have such a provision included.
In addition, many leases give the option to the landlord (not the tenant) to cancel the lease if the damage takes longer than a specified time to repair, usually 120 to 180 days. For tenants who may wish to relocate after significant damage, limiting the time in which there is unusable property is paramount.
Finally, many commercial leases provided by landlords waive the right to withhold rent if the landlord fails to provide essential services. For obvious reasons, a tenant will want to negotiate this aspect of the lease, as a failure to provide for basic services should allow the tenant to withhold rent. A landlord may also attempt to waive any implied warranties as to failure to provide building services.
Help in negotiating a commercial lease
Businesses have enough on their plate without having to worry about the minutiae of commercial leasing. At Whitehill Law Offices, P.C., our team has significant experience helping tenants preserve their rights during commercial lease negotiations and can help businesses understand their rights in any commercial lease.
For help negotiating your commercial lease, contact our offices to discuss your options.