Exacerbating the Problem of Contract Breach

At some point in their careers, experienced business people believe they can handle certain problems without first consulting with their attorneys. This often happens when decision makers have addressed certain issues before but do not recognize a specific issue which may affect the outcome of their dispute. The following dispute between a commercial landlord and his tenant illustrates this predicament.

A company that leases commercial space to small industrial tenants enters into a two-year initial lease with a manufacturer. The lease calls for three additional one-year terms with specific renewal provisions including stated escalation rates for the monthly rental amount that the tenant could opt to exercise. A stipulation attached to the commercial lease provides the specific amounts of the increasing monthly rental fees for each additional year. Before the end of the first two years, the business manager for the tenant calls the landlord’s office and says they elect to stay on for at least one more year. No more communication about this issue occurs between the two parties to the lease. The tenant does not pay the stipulated rate; instead he pays the same amount for rent as he paid previously. The landlord does not object.

A year and a half later the tenant wants to move out of the space. He tenders a check for two months at the previous rate, and on the last day of that second month, he removes all of the equipment and fixtures from the facility leaving behind damaged walls and floors. When the landlord finally contacts his attorney to address the matter, the failure to have required strict compliance with both renewal procedures and rental amounts means that the court official who subsequently hears the case does not believe that many aspects of the “stipulation,” including a provision that spells out the damages the tenant would have to pay in this instance, should apply. While the landlord does recover an award, it is not nearly as large as it would have been had the landlord consulted with his attorney prior to the time of the renewal. The attorney would have reviewed the situation and applicable documentation and advised the landlord appropriately so he could have maximized the amount he recovered, or at least negotiated leverage.

Attorney George “Dave” Giddens has spent 30 years negotiating commercial leases for many types of businesses. Contact Giddens & Gatton Law, P.C. at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com. Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.