The default clause defines what counts as a failure to perform under your lease, how much notice and time you get to fix it, and what the landlord can do if you do not. Remedies range from the landlord fixing the problem and billing you, to ending the lease, recovering unpaid and future rent, and clawing back concessions like free rent.
What this clause does
A lease is a long list of promises. The default section explains what happens when one of them is not kept. It usually separates the first stage, a simple failure such as rent arriving late or an insurance certificate that lapsed, from the second stage, when you have received written notice and the cure period has run out without a fix. That second stage is what switches on the landlord's heavier remedies.
Most standard Southern California industrial lease forms give money problems the shortest fuse. Missing rent typically gets a few days after notice. Paperwork items, like an insurance certificate, an estoppel certificate or financial statements, usually get a bit longer. Physical obligations such as repairs often get the most time, frequently with room to keep going past the deadline if you started promptly and are working diligently. A few events skip the cure period entirely, including walking away from the building, giving the landlord false financial information, or a bankruptcy filing.
Watch the guarantor language too. Many leases treat a guarantor's death, insolvency or attempt to revoke the guaranty as your default, even though you do not control the guarantor. The usual fix is posting replacement security within a set number of days.
What the landlord can do after a breach
Once a default goes uncured, the landlord typically has several paths. It can step in and perform the obligation itself, such as buying the insurance you did not carry or repairing a damaged dock leveler, then bill you for the cost plus an administrative markup. It can end the lease, take the building back and sue for what it lost, including the gap between your rent and what a replacement tenant will pay over the rest of the term. In states that allow it, and where the lease says so, it can instead keep the lease alive and collect rent as it comes due while you stay responsible for the property.
Your concessions are also on the line. Free rent, tenant improvement dollars and the landlord's leasing commissions are commonly recoverable if you default. As I explain in Industrial Intelligence, the free rent string exists so a tenant cannot collect the concession and walk away before holding up its end of the deal.
State law adds its own layer. Landlords generally must serve a formal statutory notice before filing an eviction, and many leases allow that notice to serve as the contractual default notice too. Once that process starts, the timelines are short.
Where it goes wrong
One avoidable problem is a notice nobody read. Default notices go to the address in the lease, and in an industrial lease that address is often the building itself. If the notice lands with a receiving clerk at the warehouse, the cure clock can run out before anyone with authority sees it.
Another is a small, non-monetary item that snowballs. A lapsed certificate of insurance, an estoppel certificate you never returned, or a rules violation about overnight trailer parking can each be a default. Ignore it long enough and it becomes a breach, which can put your free rent, your security deposit and in a worst case your right to stay at risk.
A third is running a building that no longer matches the lease: a use the lease does not allow, materials it prohibits, or a 3PL customer occupying part of the space without consent. If you lease more than one building from the same owner, check for cross-default language, which lets a problem at one site become a default at all of them.
What to negotiate
Cure periods are the heart of this clause. Ask for written notice before any default is declared, including at least the first late payment in any twelve-month stretch. For non-monetary items, ask for a reasonable cure period plus an extension as long as you begin promptly and keep at it. Push back on automatic defaults that are out of proportion to the problem, and narrow or remove cross-default language.
Then look at the other side of the table. Many landlord-drafted leases say little about what happens when the landlord fails to perform. Ask for a landlord cure period with a firm end date and the right to make urgent repairs yourself and be reimbursed if the landlord does not act, especially for problems that stop your operation, like a roof leak over inventory or a failed electrical service.
Have a real estate attorney review how the remedies section interacts with your state's eviction and damages rules, because that interaction sets your real exposure.
If you are the tenant
- Ask for written notice and a short grace period before the first late payment in any twelve-month period counts as a default.
- Get a cure period for non-monetary defaults that extends as long as you start promptly and keep working diligently.
- Send default notices to a named executive and your counsel, not only to the warehouse address.
- Limit the landlord's markup on costs it incurs curing your default, and require it to show you the invoices.
- Add landlord default language with a clear cure period and a right to make emergency repairs and recover the cost.
If you are the owner
- Enforce early and consistently. A late payment is far easier to address in month two than in month nine, and a clean record of timely notices matters if the dispute escalates.
- Make unamortized free rent, tenant improvement dollars and leasing commissions due on an uncured default.
- Confirm the tenant entity on the lease is valid and in good standing, since that is the party you can actually pursue.
- On larger leases, consider a letter of credit, which you may be able to draw even when a cash deposit would be tied up in a bankruptcy.
Go deeper in Justin's books
Both books walk through leases chapter by chapter, from the tenant side and the owner side.
you should not be able to negotiate concessions out of your landlord and then take the money and run. You have to fulfill your part of the bargain.
Common questions
What is the difference between a default and a breach in a commercial lease?
In many industrial leases, a default is the failure itself, such as rent that did not arrive or insurance that lapsed. It becomes a breach when you have received notice and the cure period passes without a fix. The landlord's major remedies, like ending the lease, usually attach to the breach, not the first missed step.
Can my landlord evict me over one missed rent payment?
Depending on the lease and state law, an unpaid rent installment that is not cured after notice can start the eviction process. Most landlords would rather be paid than go to court, but you should not count on that. Pay on time, raise disputes separately, and negotiate a notice requirement for occasional late payments.
Do I have to pay back free rent if I default?
Often, yes. Many industrial leases say abated rent becomes due immediately if you default, and some add unamortized tenant improvement costs and commissions. Read the concession language and the default section together so you know the full number at risk.
General information about how industrial leases commonly work, not legal advice. Every lease is different: have a California real estate attorney review yours before you sign.