What You Need to Know About Commercial Lease Agreements: Part IV

This blog post is part IV in a series of posts providing an overview of important considerations for commercial lease agreements.  Regardless of whether a landlord or tenant, there are numerous issues that all parties should consider prior to entering into a commercial lease agreement.  Part I addressed mandatory and suggested commercial lease agreement terms and the legal duties and obligations of the parties involved.  Part II discussed the enforceability of certain lease agreements, tort liability for both landlords and tenants, and the use of personal guarantees.  Part III focused on the tenant’s remedies, claims and defenses when a landlord breaches the commercial lease agreement.  This fourth and final post in this series will discuss the landlord’s remedies, claims and defenses for breaches by the tenant.

In Florida, self-help entry by the landlord is prohibited.  In other words, the landlord cannot make a forcible entry into the premises when a tenant breaches the lease, and the landlord can only obtain possession as provided by law.  Fla. Stat. § 83.05(2).  Even if the lease agreement contains a re-entry provision, that provision is ineffective.  Ardell v. Milner, 166 So.2d 714 (Fla. 3d DCA 1964).  When tenants breach the lease agreement, Florida law provides landlords three options:

• consider the lease terminated and resume possession of the premises for own purposes;

• hold possession of the premises for the tenant’s account and seek general damages for any amount not recovered by re-renting the premises under tenant’s account;

• take no immediate action, but rather wait to sue the tenant as future rent becomes due or for an accelerated amount if allowed under the lease agreement. Williams v. Aeroland Oil Co., 155 Fla. 144 (1944).

These options may be limited by the terms of the underlying lease agreement so landlords should review the documents prior to taking any remedial action.  General damages are the difference between the contract rent and the amount the landlord is able to recover through a good faith effort to re-rent the premises, but if the landlord accepts the tenant’s surrender of the premises then the tenant is relieved of liability for future rent due under the lease agreement.  Hulley v. Cape Kennedy Leasing Corp. of Fla., 376 So.2d 884 (Fla. 5^th DCA 1979).  Therefore, rather than accepting the tenant’s surrender of the premises, a landlord may rather attempt to re-rent the premises as an agent for the tenant under the tenant’s account.  This provides the tenant with a set-off of his or her liability for the new rent received.  Id.  If the lease contains an acceleration clause, the landlord may claim all rent for the entire term due upon one instance of default.  However, the landlord’s right to accelerate the rent is lost where a landlord re-rents the premises for the tenant’s account, or takes possession of the premises with the intent to end the lease.  Coast Fed. Sav. & Loan Assoc. v. De Loach, 362 So.2d 982 (Fla. 2d DCA 1978).

Sometimes a tenant may refuse to vacate the premises at the end of the lease term, which is called a “holdover tenant.”  Landlords have four options against holdover tenants, which remedies are considered mutually exclusive:

• demand double the monthly rent at the end of each month where a tenant refuses to give up possession at the end of the lease. Stat. § 83.06.  The tenant is not liable for double rent if he or she holds over with a good faith claim of right based on reasonable grounds.  Grimm v. Huckabee, 891 So.2d 608 (Fla. 1^st DCA 2005);

• treat the tenant as a trespasser and claim damages for being deprived reasonable rental value of the premises;

• waive the tenant’s wrongful behavior in holding over and demand an increase in rent for the new lease term; David Properties, Inc. v. Selk, 151 So.2d 334 (Fla. 1^st DCA 1963);

• eviction of tenant.

A landlord may bring an eviction action against a tenant who defaults in rent payments after providing three days’ written notice.  Fla. Stat. § 83.20(2).  In any eviction action, the tenant must pay into the court registry the amount alleged in the complaint as unpaid rent along with any rent accrued during the pendency of the action, unless tenant’s defense is one of payment and/or satisfaction.  If a landlord discovers the tenant is committing waste concerning the leased premises, the landlord can seek an injunction from the court to restrain the tenant from committing further waste.  After waste has been committed by a tenant, the landlord may bring an action for monetary damages for the waste that caused injury to the landlord’s future interest in the property.

Commercial landlords also have a statutory lien for rent against the tenant’s property found on or off the premises and in the possession of any person.  Fla. Stat. § 83.08.  This statutory lien is “viable only as long as the underlying lease exists.  Once the tenant’s obligations have been met under the lease, the landlord’s lien is extinguished and any other inferior liens may ripen to a priority superior to a landlord’s lien, which may come to fruition by virtue of a new lease.”  Flowers v. Centrust Sav. Bank, 556 So.2d 1123 (Fla. 3d DCA 1989).  A landlord must enforce the lien for rent through statutory distress for rent proceedings and, if successful, the court will issue a “distress writ” in favor of the landlord, which the landlord can have a sheriff execute against the tenant’s property.  Fla. Stat. § 83.11 – 83.19.  However, according to the Florida Statutes, a secured party in the tenant’s property has a superior lien to a landlord’s lien when the secured party perfects his or her interest before the tenant’s personal property is brought onto the premises.  Fla. Stat. § 679.2031.