November 26, 2017
In a commercial lease than can run 15 to 25 pages (single spaced) or more, there can be trips and traps for both landlord and tenant. Thus, both should carefully consider not just the major financial and business terms, but even “throw away” or boilerplate provisions. In the alternative, each party should carefully perform his due diligence before undertaking lease obligations.
We recently represented a tenant in a commercial lease in which the lease — as is common in landlord-written leases — obligated the tenant to “comply with all laws throughout the term of the lease.”
In this instance, our client was a medical user. The zoning jurisdiction of the property differentiated minimum parking requirements for medical office uses versus general office uses. The consequence of that differentiation for our medical office client was that the space simply would not comply with zoning requirements for our client’s use.
In other words, he could not “comply with all laws.”
The problem was complicated and compounded because (a) the landlord applied for the building permit on which he represented to the zoning authority that the premises would be “general office” uses and (b) $75,000 in buildout work had been completed before the non-compliance was discovered. Further, the landlord originally solicited tenant to occupy the premises and at least implicitly represented that it would comply with zoning requirements for the tenant’s use.
The zoning authority simply would not permit the occupancy contemplated by the lease.
In this circumstance, is the tenant in breach and therefore responsible for the tenant build-out costs and rent payments until the premises can be re-rented? Is the landlord in breach of the lease and responsible for the damages the tenant suffered because he could not timely occupy the premises?
It candidly was vague. There was no clear answer, and the problem was significant for the client and the landlord. Ultimately, the parties agreed upon a fair settlement of the issues.
But the situation highlighted the critical importance of each and every provision of the lease, even “throw away” provisions.