Don't Let Minor Violation Jeopardize Special Rights

January 31, 2014
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An owner that gives you a special right or option—such as a renewal option—may also require that you not be in default of the lease at the time you exercise that right or option.

Although that requirement may seem reasonable, it could cause problems for you. For example, suppose you try to exercise a right or option, but the owner discovers that one of your employees has been storing garbage in the hallway outside your space, rather than putting it in the Dumpster outside. Instead of giving you an opportunity to cure—that is, correct—the violation before it becomes a lease default, the owner cancels your right or option, even though you may not have known about the minor lease violation.

To limit the owner's ability to cancel your right or option when you try to exercise it, negotiate that: (1) the default must be “material”; and (2) the cure period must expire before the owner can take action.

Make sure the lease says that you can exercise the right or option as long as you're not in “material” default of the lease. A material default is an important default—for example, the nonpayment of rent. This way, a minor violation won't become a major roadblock to your exercising the right or option.

And make sure that a material violation must be “beyond any applicable cure period” before it becomes a material default. That means you must be given an opportunity to cure the violation.



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