Building Better Leases Series – Term: Delay in Possession & Lessee Compliance

Building Better Leases

Delay in Possession refers to the rights and duties of the Parties if the leased property is not delivered to the Tenant on the Commencement Date of the lease. This term protects the Landlord from being held responsible for a delay.

There are various reasons for a delay. One reason could be related to a legal dispute between a Tenant and Landlord. In some instances, a struggling tenant will stop paying rent in the months before their lease ends and then file bankruptcy in the final days of the lease which protects the Tenant for months while filing makes its way through the courts. Another reason could be related to an incoming Tenant’s request for improvements. If the existing Tenant takes longer to leave, it delays the Landlord’s ability to start making improvements for the new Tenant. Sometimes the delay is related to the construction itself. Construction requires permits, drawings, bidding, etc. which will often delay the ability of the Lessee to obtain possession. It’s important to note that failure to provide possession by the Commencement Date does not necessarily invalidate the Lease.

Many tenants put obtaining insurance low on the list of priorities when moving into a new building. The Lessee Compliance ensures that tenants are in fact covered by insurance. The Lessor can withhold possession of the Premises until such evidence is shown, so it’s important that Lessee’s are aware of this clause prior to the Commencement Date so that they can move in on time.