Default and Breach
A Default refers to the Lessee’s failure to comply with or perform any of the terms, covenants, conditions or Rules and Regulations under the Lease. A breach refers to the occurrence of one or more of the following Defaults and the failure of the Lessee to cure a Default within a reasonable amount of time. For example, if a Lessee fails to pay Rent on time, that would constitute as a Default. If the Lessor sends a notice and the Lessee ignores it and/or does not pay within the period specified, then the Default turns into a Breach.
Abandoning the Premises is considered a form of Breach; the Lessor is relying on the Lessee to occupy the space during their Lease and maintain and secure the Premises. If the Lessee does not obtain required insurance and other documentation that is also considered a Default and they have 10 days to complete said fault. The Parties may modify this section to allow for different time periods because large corporations, for example, may require more time to provide the necessary documents compared to a smaller company. The commission of waste, acts of nuisance and/or illegal acts are all deemed as Default while providing false financial statements is a Breach.
The death of a guarantor or other problems with a guarantor can constitute a Breach unless the Lessee provides alternate security within 60 days. A Default of the Lease can be triggered by an uncooperative third party, ie. The Guarantor, who may not be under the control of the Lessee. Lessees need to be aware that the Guarantor has such ability and need to be assured that the Guarantor is aware of its obligations under the Lease and intends to abide by them.
The Lessee has 10 days following a written notice to perform their affirmative duties/obligations. If they fail to do so, then the Lessor may perform them on behalf of the Lessee. In the event that the Lessor carries out these obligations, the Lessee is responsible for paying the Lessor 115% of the Lessor’s cost; the additional 15% is to compensate the Lessor for the time involved in arranging the insurance, licenses, permits, or approvals.
When the Lessee Breaches, the Lessor has three options:
- The Lessor can bring an unlawful detainer action and evict the Lessee
- The Lessor can leave the Lessee in possession and sue the Lessee each month for the Rent they owe
- The Lessor may choose another remedy that the law provides