The Playbook / Clause 10
Default & Remedies
Tenant Default; Landlord Default; Notice and Cure; Tenant Remedies; Mitigation
The Default & Remedies provisions govern what constitutes a default by either party, the notice and cure mechanism, and the remedies available to the non-defaulting party. Tenant default dominates landlord forms, but tenant counsel must add a meaningful landlord-default mechanism with concrete tenant remedies: self-help, offset, abatement, equitable relief, and termination. The clause has three pressure points: scope of default events, notice and cure periods, and the menu of remedies available.
What the landlord’s form is doing
Landlord wants broad default definitions (covering monetary, performance, insolvency, abandonment, and indirect events), short cure periods, self-help and acceleration remedies, and no reciprocal landlord-default mechanism with real remedies. Landlord prefers cumulative-not-exclusive remedies, liquidated damages, default interest, late fees, recovery of attorneys’ fees, and cross-default among affiliated leases.
Landlord may also seek to waive Tenant’s right to mitigate, accelerate all rent for the remainder of the term as a present-value lump sum, and recover consequential damages.
Landlord-side guidance instructs landlords to pair no-waiver lease language with a contemporaneous nonwaiver letter whenever they accept a partial rent payment, because unqualified acceptance of partial rent (particularly repeated acceptance) can waive the right to collect the balance and to insist on timely payment going forward. Tenant counsel should document any landlord acceptance of partial or late rent made without written reservation of rights; such acceptance may support waiver and estoppel defenses to a later default claim.
What tenants should watch for
Tenant defaults and cure rights
Tenant default: payment. Push for fifteen (15) business days’ written notice and cure period for monetary defaults (rent, additional rent, OpEx). Resist five (5)-day or auto-default provisions. Carve out bona fide disputes (e.g., disputed OpEx charges) from default treatment so long as undisputed amounts are paid.
Tenant default: non-monetary performance. Push for thirty (30) days’ written notice, with extension if cure reasonably requires longer (so long as tenant commences cure within thirty days and diligently pursues completion). This covers items like repair work, insurance certificate renewal, or restoration that take time.
Tenant default: insolvency / abandonment. Resist automatic-default on insolvency triggers; allow tenant the bankruptcy-code protections of Section 365. Resist "abandonment" definitions that turn on tenant’s temporary going-dark; require sustained non-occupancy (60+ days) coupled with non-payment of rent.
Chronic-default and financial-condition triggers. Landlord default definitions increasingly include chronic-violation provisions (a third default within twelve (12) months becomes non-curable at Landlord’s election), guarantor net-worth and debt-rating triggers, judgment and insolvency-evidence triggers, and merger or change-of-control triggers. Delete or narrow these; at minimum, chronic-default treatment should require uncured monetary defaults, and changes of control should be governed exclusively by the Assignment & Subletting clause.
Event-of-default drafting traps. Landlord “event of default” taxonomies sweep in every payment category, chronic-violation triggers, insolvency events, and transfer violations, and pair them with abbreviated cure periods, including cure periods as short as two business days for insurance defaults and no cure at all for transfer violations. Tenant counsel should secure a diligent-cure extension for non-monetary defaults that cannot reasonably be cured within the stated period (capped, if necessary, at sixty days), and should resist chronic-default provisions that strip cure rights after repeated violations.
Landlord default and tenant remedies
Landlord default. Define landlord default broadly: failure to perform any material obligation, including delivering Premises, completing Landlord’s Work, performing repairs, paying TIA, providing services, and honoring tenant’s express rights (exclusives, options).
Cure period for landlord default. Thirty (30) days for non-monetary obligations, with extension for items reasonably requiring longer (so long as Landlord commences cure within thirty days). Five (5) business days for monetary obligations (e.g., TIA, rent abatement, condemnation proceeds owed to tenant).
Tenant remedies on landlord default. Tenant’s remedies should include: (i) self-help: Tenant performs Landlord’s obligation and offsets reasonable costs against rent next due, with notice; (ii) rent abatement during the breach (proportional to the impact); (iii) injunctive or equitable relief; (iv) damages; (v) termination after sustained breach (typically sixty (60) to ninety (90) days uncured). Self-help and offset are the most practical remedies and should not require litigation.
Landlord remedies: scope and limits
Acceleration of rent. Exclude landlord’s right to accelerate all remaining rent. If accepted, require present-value discount, deduction of mitigation (whether or not landlord actually mitigates), and limitation to actual damages.
Acceleration: moderating terms. Where acceleration cannot be struck entirely, negotiate the moderating terms landlords concede to strong tenants: discount of the accelerated sum to present value at a specified discount rate, preferably pegged to a published index rather than fixed at signing, because a rate fixed at signing may bear no relation to interest rates at the time of default, together with credit for reletting proceeds and acceleration of only a portion of the remaining term.
Rent-concession clawback. Landlord remedy clauses commonly provide that upon any default all rent concessions and waived base rent are cancelled and become immediately due, as if never granted. Strike the clawback, or limit it to defaults resulting in lease termination and exclude concessions already earned through Tenant’s performance.
Landlord’s lien, distraint, and confession of judgment. Request waiver (or at minimum subordination) of any statutory or contractual landlord’s lien and right of distraint against Tenant’s fixtures, equipment, and inventory financed by third parties; absent a waiver or subordination, equipment financing may be unavailable to Tenant. Delete any confession-of-judgment clause; landlords routinely eliminate these for substantial tenants.
Mitigation
Mitigation. Insist on landlord’s duty to mitigate damages. The majority rule across U.S. jurisdictions requires landlord to make reasonable efforts to re-let the Premises; an express mitigation clause makes this explicit and avoids the express-vs-implied debate.
Mitigation: landlord-form dilution. Anticipate landlord mitigation clauses that purport to satisfy the duty by definition: no obligation to negotiate with prospects until Landlord regains full legal possession free of Tenant’s claims, no obligation to prefer the Premises over other vacant space, no obligation to accept below-market rent or unacceptable lease terms, and a tenant waiver of mitigation defenses absent bad faith. These deemed-satisfied criteria substantially hollow out the mitigation duty and should be resisted or narrowed.
Mitigation-limitation clauses. Landlord forms now routinely pair the acknowledged duty to mitigate with limitation clauses providing that the landlord has no duty to market the space until it regains full legal possession, no duty to prioritize the defaulted space over other vacancies, no duty to accept below-market rent or undesirable prospects, and that compliance with enumerated steps conclusively satisfies the duty.
Fees and charges
Late fees and default interest. Cap late fees at a reasonable percentage of the unpaid amount (e.g., 5%) and only after a grace period of [five (5)] days. Default interest at a reasonable rate (e.g., 2-3% over prime). Resist liquidated damages that exceed a reasonable estimate of actual harm (penalty doctrine).
Attorneys’ fees. Mutual and reciprocal: prevailing party recovers reasonable attorneys’ fees. Resist one-way fees in landlord’s favor.
How this typically gets negotiated
Both sides negotiate cure periods and notice mechanics: how long the tenant has to cure a missed payment or other default, and whether notice is required at all. Tenants with leverage also build a genuine landlord-default remedy: notice, a cure period, and then self-help with an offset against rent. Acceleration clauses get negotiated down to present value with a duty to mitigate.
The specific language that resolves each of these points depends on the deal. Talk to Paul about your lease →
How the states treat it
Majority rule. Express default and remedy provisions are enforced in commercial leases. Acceleration is enforced where expressly provided, subject to present-value discount and the duty to mitigate in most jurisdictions. The duty to mitigate damages in commercial leases is the majority rule; a minority of jurisdictions still permits landlord to sit on the lease without mitigating.
Liquidated damages and penalties. Liquidated damages are enforced if they represent a reasonable estimate of actual damages at the time of contracting and damages are difficult to calculate. Penalty doctrine voids liquidated-damages provisions that are unreasonable or punitive. Holdover penalty multipliers (1.5-2x) are commonly enforced; multipliers above 2x face increasing scrutiny.
Acceleration. Acceleration of rent is enforced as written, but most courts require landlord to mitigate damages and credit recoveries against the accelerated amount. Acceleration without mitigation is increasingly disfavored.
Notable cases
Sommer v. Kridel, 74 NJ 446, 378 A2d 767 (1977). New Jersey Supreme Court adopted the majority rule requiring landlord to mitigate damages on tenant default. Foundational authority cited in many later state-court decisions adopting the duty to mitigate.
Game film: real clauses from real leases
Excerpts from commercial leases filed as exhibits with the Securities and Exchange Commission, trimmed for length. Follow the citation for the full document on EDGAR.
“Terminate Tenant’s right to possess the Premises by any lawful means with or without terminating this Lease, in which event Tenant will immediately surrender possession of the Premises to Landlord. In such event, this Lease continues in full force and effect (except for Tenant’s right to possess the Premises) and Tenant continues to be obligated for and must pay all Rent as and when due under this Lease. … Tenant is immediately liable to Landlord for all costs and expenses Landlord incurs re-entering or reletting all or any part of the Premises (the “Re-entryCosts”) … (c) reletting, renovating or altering the Premises; and (d) real estate commissions, advertising expenses and similar expenses paid or payable in connection with reletting all or any part of the Premises. … Landlord acknowledges its duty under applicable law to mitigate damages resulting from and Event of Default by Tenant.”
Why it matters. This remedy lets the landlord retake the space while keeping the tenant on the hook for full rent plus every cost of reletting, so the closing acknowledgment of the landlord's duty to mitigate is the sentence tenant counsel should insist on and then broaden.
“In the event of any default by Tenant which is not cured after notice and the expiration of such cure periods as specified in this Lease, then Landlord shall have the immediate option to terminate this Lease and all rights of Tenant hereunder by giving written notice to Tenant of such intention to terminate. In the event that Landlord shall elect to so terminate this Lease, then Landlord may recover from Tenant all damages suffered by Landlord as a result of Tenant's default, including the worth at the time of award (computed in accordance with Section 1951.2 (a) (3) of the California Civil Code) of the amount by which the unpaid Minimum Monthly Rent for the balance of the Term after the time of award exceeds the amount of such Minimum Monthly Rent loss that Tenant proves could be reasonably avoided …”
Why it matters. The phrase "that Tenant proves could be reasonably avoided" places the burden of proving avoidable rent loss on the tenant, a statutory allocation under California Civil Code section 1951.2 that tenants in other states should not concede by contract without noticing.
“The following provision is hereby added as Section 27(e): "(e) Landlord agrees to use commercially reasonable efforts to relet the Premises in order to mitigate its damages, but Landlord shall not be required to prefer the Premises over other buildings owned by Landlord or its affiliates in the geographic area in which the Premises is located.”
Why it matters. This negotiated amendment shows a tenant obtaining an express mitigation covenant from the landlord, tempered by a portfolio carve-out that lets the landlord fill its other vacancies first, which is the compromise most institutional landlords will offer.