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Q&A – Commercial Real Estate Leasing – Remedies

By:  Alejandro E. Jordan, Esq.img_2262

Q.  IF A TENANT BREACHES THE LEASE: 

  • Are there any implied remedies available to the landlord, such as the acceleration of rent?

  • Is there a limitation on the landlord’s ability to exercise self-help?

  • Is there a common form of an eviction proceeding and, if so, what is the typical length of time for the proceeding?

  • Are there specific mechanisms for expedited remedies, such as waiver of jury trial or arbitration?

  • Is the landlord required to mitigate its damages without an express obligation to do so?

Implied Remedies

In commercial leases in Florida, if a tenant fails to pay rent when due, a landlord has a right to obtain possession of the premises (§ 83.05(1), Fla. Stat.). A landlord has the statutory right to demand double the monthly rent when a tenant fails to give up possession of the premises at the end of the tenant’s lease (§ 83.06, Fla. Stat.).

The landlord does not have the right to accelerate rent unless the lease specifically includes an acceleration of rent provision.

Self-Help

Landlords do not have any self-help remedies in Florida and may be subject to sanctions and penalties for the wrongful exercise of self-help rights. A landlord may retake possession of the premises only if:

  • The landlord pursues a court action.
  • A tenant voluntarily surrenders or otherwise “abandons” the premises in a manner that meets specific Florida requirements for abandonment.

(§ 83.05, Fla. Stat.)

Eviction Proceeding

Unless otherwise stated in a commercial lease, when a tenant is in default for failure to pay rent, the landlord must provide a statutory form of three days’ notice requiring either:

  • Payment of the rent.
  • That the tenant tender possession of the premises to the landlord.

(§ 83.20, Fla. Stat.)

Unless otherwise stated in a commercial lease, when a tenant is in non-monetary breach, the landlord must provide 15 days’ written notice requiring either:

  • The cure of the breach.
  • That the tenant tender possession of the premises to the landlord.

(§ 83.20, Fla. Stat.)

After providing the required notice (whether for the statutory notice period or any longer time period required in the lease), the landlord may pursue a summary removal action.

Additionally, a commercial landlord has the right to summary procedure when bringing an action for unlawful detainer against a tenant who holds over in possession after its right to the premises has expired (§§ 83.21 and 51.011, Fla. Stat.). Florida law provides for expedited landlord remedies in an eviction action under a commercial lease when the lease document includes a waiver of jury trial. A landlord would not be permitted to exercise self-help with regard to a defaulting tenant occupying demised premises under a license agreement when an ejectment action (not an eviction action) would be required and would likely take a longer time to resolve.

Expedited Remedies

Landlords and tenants have the right to contract for a waiver of jury trial and to include requirements for arbitration, mediation, or both. In commercial leases, a tenant may waive:

  • The requirement under 83.12, Fla. Stat. that the plaintiff in a distress for rent action file a bond payable to the tenant in at least double the sum demanded by the plaintiff.
  • Its right under 83.14, Fla. Stat. to replevy distrained property.
  • Its right to receive three days’ written notice requiring the payment of rent or possession of the premises under 83.20, Fla. Stat., although a landlord would typically issue a three-day notice even with this waiver, but rely on the tenant’s waiver in the event of any technical challenges to the form of three-day notice.
  • Any claim for damages against the landlord that it may have based on the assertion that the landlord has unreasonably withheld or unreasonably delayed any consent.
  • Its right to assert a non-compulsory counterclaim.

Mitigation of Damages

Generally, there is no requirement to mitigate damages. Reasonable mitigation efforts may be required, however, under certain circumstances where the landlord retakes possession of the premises without terminating the lease.

Automatic Termination of a Lease in a Foreclosure Action

Q.  WHEN A LANDLORD’S LENDER FORECLOSES ON ITS LIEN RECORDED AGAINST THE LANDLORD’S PROPERTY, WOULD THE LEASE INTEREST THAT IS SUBORDINATED TO THE LENDER’S LIEN AUTOMATICALLY TERMINATE? IF SO, HOW DO THE PARTIES AVOID AUTOMATIC TERMINATION OF SUBORDINATED LEASE INTERESTS?

The subordinated leasehold interest of the tenant is not foreclosed under Florida law unless, in the lender’s foreclosure action, the tenant is:

  • Named as a party defendant.
  • Properly served with the suit papers.

Redding v. Stockton, Whatley, Davin & Co., 488 So. 2d 548 (Fla. 5th DCA 1986).

Q.  IF A SUBORDINATED TENANT IS NAMED AS A DEFENDANT IN A FORECLOSURE ACTION, THE TENANT CAN AVOID TERMINATION OF THE LEASEHOLD INTEREST:

  • By exercising a contractual right, if one exists, between the tenant and the lender, giving the tenant the right to redeem or otherwise avoid foreclosure.
  • Through a negotiated arrangement between the tenant and the foreclosing lender.
  • By exercising the right of redemption through the mortgagor/owner (see Burns v. Bankamerica Nat’l Trust Co., 719 So. 2d 999 (Fla. 5th DCA 1998)).

The right of redemption must be exercised before the clerk of court issues the certificate of sale, unless the final judgment of foreclosure specifies a later deadline. Redemption requires payment in full to the foreclosing plaintiff of all sums awarded under the final judgment of foreclosure, including post-judgment interest. (§ 45.0315, Fla. Stat.)

When the tenant exercises the right of redemption through the mortgagor/owner, the mortgagor/owner is the beneficiary of the redemption. The mortgagor/owner retains ownership and possession of the mortgaged property free and clear of the mortgage debt. The tenant’s leasehold interest survives but remains subject to the lease and to the interests of the mortgagor/owner.

JordanLawyers-ICON-Dark-241x300About the Author

Jordan + Lawyers law firm has over 20 years’ experience as advisors to foreign national and domestic real estate investors, real estate owners and tenants, developers, real estate investment companies, and ultra-affluent high net worth individuals. If you have any questions on whether a particular a commercial real estate transaction is right for you, need assistance in leasing or in analyzing due diligence on a particular opportunity, contact us at 305-501-2836 or visit us at www.JordanLawyers.law for immediate assistance.  Our offices are conveniently located in Miami, Florida (Coral Gables), and service clients throughout the State of Florida.

 

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