1-8 Florida Commercial Landlord Tenant Law - 8.02

1-8 Florida Commercial Landlord Tenant Law § 8.
02
Florida Commercial Landlord Tenant Law > CHAPTER 8 DRAFTING A COMMERCIAL LEASE
§ 8.02 Subjects to Consider21*
The following is a list of subjects that should be considered in the drafting of a commercial lease.22
1. Purpose of the lease contract. What is the intent of the parties? What is the purpose of the
commercial lease?
2. Parties. The lease contract should include the specific names and addresses of the parties to the
contract, including the respective capacities of the parties.23
3. Description of the premises. The contract should include a precise description of the leased
premises.24 Does the tenant have any appurtenant rights? Does the tenant have the right to
relocate his business? Does the landlord have the right to relocate the tenant’s business?25 Who
21
See also § 8.03, infra.
*
This chapter includes research and analysis through Volume 152 of the Southern Reporter Third. All statutory references are to the
official 2014 Florida Statutes, unless indicated otherwise.
22
The structure of this drafting checklist is based on a checklist in chapter 2 of COMMERCIAL REAL PROPERTY LEASE PRACTICE. The book
also contains an extensive collection of commercial lease clauses, with commentary, in chapter 3. See also supra note 2.
23
See C.G. Gulf Property Assoc., L.P. v. Kambanis, 36 Fla. Supp. 2d 154 (1989), for a case in which the president of a corporation
was determined to be a proper party to a suit for breach of a lease when the court determined that from the lease document there was
no clear indication that the corporation was a separate entity that could be represented.
24
In Western World, Inc. v. Dansby, 566 So. 2d 866, 868 (Fla. 1st DCA 1990), the description “2309 Apalachee Parkway, Tallahassee,
Florida” was sufficient to create an enforceable lease. The court said, “where a lease and option to purchase agreement identifies a parcel
of land by a street address and names the city and state in which it is located, then no patent ambiguity exists and the court should
properly receive parol evidence to determine the intent of the parties in light of surrounding circumstances so as to overcome any latent
ambiguity regarding the extent of the parcel to be conveyed.” See also Peripety Group, Inc. v. Smith, 237 Ga. App. 158, 514 S.E.2d 262
(Ga. App. 1999) (exhibit attached and expressly incorporated into lease describing property as “Covington Shopping Center, Highway
278 N.W., Suites 2, 3, 4, Covington, Georgia 30209” constituted sufficient identification of property despite lack of exact measurements
and use of word “approximately” in reference to dimensions of property); see also Bajrangi v. Magnethel Enters., 589 So. 2d 416, 420
(Fla. 5th DCA 1991) (owner estopped from asserting lease was unenforceable because of inadequate description where owner chose
description and owner’s attorney’s drafted lease); Tucker Station, Ltd. v. Chalet I, Inc., 203 Ga. App. 383, 417 S.E.2d 40 (Ga. App. 1992)
(tenant could not claim to have been fraudulently led to believe that the landlord owned certain property where the lease contained a legal
description and plan showing otherwise).
25
A provision allowing the landlord of a multi-tenant building to relocate a tenant to new premises allows the landlord flexibility in
attracting and placing new tenants. To reduce inconvenience and business disruption, a tenant may want the lease to require substantial
notice from the landlord, that any move is to a substantially similar space, and that no move may occur when there is little time remaining
on the lease. Rudisill, A Commercial Lease Primer (With Forms), Prac. R. E. Law. (July 2013).
1-8 Florida Commercial Landlord Tenant Law § 8.02
will pay relocation costs? Does the tenant have the right to expand the premises?26 Is the
definition of the premises limited to a building “shell”?27 Is the rent based on square footage?
If so, is the description of the leased premises accurate and a sufficient basis from which to
determine the rent?28 In the case of a shopping center, the landlord has to be careful to not agree
to things that are dependent on land that may be in that shopping center, but not owned or
controlled by the landlord. Only land the landlord owns or controls should be included in the
definition of “shopping center,” meaning land owned by a department store or anchor store or
that presently is or is contemplated to become an outparcel for future sale or lease generally
needs to be excluded.29
4. Term of the lease. The exact time and date should be stated for the commencement of the term
and for the end of the term. The time and date stated for the beginning and the end of the term
mark the proper time for the transfer of possession of the premises.30
26
Consider Mansell 400 Assocs., L.P. v. Entex Info. Servs., 239 Ga. App. 477, 519 S.E.2d 46 (Ga. App. 1999). A lease clause in
Mansell provided in part:
If Tenant is not nor has been in Default hereunder, thirty-two (32) or forty-four (44) months respectively, after the Lease
Commencement Date, Tenant may notify Landlord in writing that it desires to expand the Premises by at least thirty-five
percent (35%) and Landlord and Tenant shall enter into negotiations to expand or relocate the Premises within
_____________ owned by Landlord. If Landlord does not have space to expand or relocate Tenant, then within ten days
after Landlord notifies Tenant that there is no available space for Tenant to expand or relocate, Tenant may give notice of
its intent to cancel this Lease one-hundred eighty (180) days after such notice … .
Some of the problems associated with the expansion clause were whether the agreement to negotiate was merely an unenforceable
“agreement to agree” in the future, and whether correspondence from the landlord regarding the availability of space for expansion
constituted notice of no available space. Both are matters that might be more carefully addressed in drafting such a provision.
27
In Nielsen v. Gold’s Gym, 2003 UT 37, 78 P.3d 600 (Utah 2003) the lease did not expressly address which party would pay for
improvements required in a building shell to make it useable for the purposes for which it was leased. The landlord argued that payment
of tenant improvements was implicitly addressed in the definition of the term “premises.” The definition referred only to the building
shell already planned and under construction at the time the lease was signed. The landlord said the premises could not reasonably consist
of both a building shell already planned and additional unknown tenant improvements, and therefore the duty to pay for tenant
improvements was with the tenant. The court disagreed and found the lease to be ambiguous and unenforceable.
28
See, e.g., British Am. Dev. Corp. v. Fay’s Drug Co., 178 A.D.2d 801, 577 N.Y.S.2d 528 (1991) (rent calculated on “gross leasable
area” which was defined in lease by a formula for measurement; lessor argued that a mezzanine area was included in the gross leasable
area, even though its inclusion resulted in a total square footage much in excess of the amount yielded by the formula—court held for
lessee); Wohl v. Owen, 580 N.Y.S.2d 854 (Civ. Ct. 1992) (even though leased premises were slightly more than 400 square feet, where
in additional rent calculation clause the premises were “deemed” to be 660 square feet, lessee could not avoid calculation of rent based
on higher square footage figure).
29
Rody, Discussing the Issues in Big Box Leasing: The Landlord’s Perspective, the Tenant’s Perspective, and Some Possible
Resolutions, Prac. R.E. Law (July, 2012).
30
The parties need to consider whether the lease should allow the tenant to occupy the premises prior to the actual commencement
date to allow the tenant access for improvements and to install furniture, fixtures, and equipment. If it does it should address when the
Page 2 of 27
5. Rent. The amount of rent for each payment period and the date the rent is due are two essential
elements of any rent provision to a lease contract. Will the rent include a portion of common
area costs? If so, the means of determining common area and calculating each tenants’ share
must be set out.31 Will there be a minimum monthly rent? Will there be a portion of the rent
based on a percentage of sales? Will there be a rent escalation clause?32
If there is to be a percentage rent clause, the percentage due and the date that it is to be due should
be stated. The definition of terms is very important in a percentage rent provision.33 If the percentage
amount is to be based on gross sales, the term “gross sales” should be defined in the contract. Must
the tenant use his or her best efforts under a percentage rent agreement? Must the tenant’s business
remain open certain hours under a percentage rent agreement? The lessor may want to consider the
following six factors that have been used to determine whether a covenant to remain in business will
be implied in a lease containing a percentage rent clause: “(1) whether base rent is below market
value, (2) whether percentage payments are substantial in relation to base rent, (3) whether the term
tenant’s obligation to pay base rent will commence and the tenant’s obligation to meet other terms and conditions of the lease during
any “early occupancy period.” Yi and Pinchot, Space and Term Issues in Commercial Leases (With Sample Clauses), Prac. R.E.Law.
(March 2007).
31
Consider Miracle Ctr. Assocs. v. Scandinavian Health Spa, Inc., 889 So. 2d 877 (Fla. 3d DCA, 2004). The appellee in Scandinavian
Health leased space in a mall from the appellant. The lease provided the landlord to give the tenant a written estimate of the common
area costs before each rental period and the tenant was to pay the amount in equal monthly installments. The landlord had to furnish the
tenant with a statement setting out the actual costs for the preceding year within 90 days after the end of each calendar year. Adjustments,
if necessary, were then to be made. Either party could challenge the costs and calculation within a 90-day period. The landlord claimed
that because of a computer-generated error, it had inadvertently failed, over a ten year period, to include the roof area’s square footage
in the proportionate share calculations and was, therefore, entitled to recover a substantial sum from the tenant. The court disagreed. The
landlord waived its right to include the roof-top pool area in the calculation. If it had wanted to include that area in calculating the
common area expenses, it had to do so within 90 days after the close of the calendar year.
32
One rent escalation clause that generated considerable litigation was discussed in Crown Mgt. Corp. v. Goodman, 474 So. 2d 1209
(Fla. 2d DCA 1985), review denied, 484 So. 2d 8 (Fla. 1986). The first sentence of the escalation clause provided that rents would
increase by the percentage increase, if any, of the official consumer price index. The second sentence provided that each one point
increase in the index would represent a 1% increase in the lease rentals. The appellate court called this a latent ambiguity, and said parol
evidence should be allowed to determine the intent of the parties. See also Coastal Fuels Mktg., Inc. v. Leasco Invs., 662 So. 2d 375
(Fla. 5th DCA 1995) (finding rent escalation clause based on Consumer Price Index to be clear and unambiguous); National City Bank,
Akron v. Executive Bus. Sys., 67 Ohio App. 3d 380, 587 N.E.2d 319, 320 (1990) (“where the lease terms expressly make a rental increase
automatic, the lease creates an affirmative duty upon the lessee to tender the amount”).
33
See, e.g., Medical Towers, Ltd. v. St. Luke’s Episcopal Hospital, 750 S.W.2d 820 (Tex. Civ. App. 1988); see also Demetree v. Holm,
658 So. 2d 1252 (Fla. 5th DCA 1995) (no percentage rent awarded lessor when lessee defaulted several months into second year where
lease provided percentage rent was to begin in second year). A new matter to be addressed is online sales by the tenant. Will such sales
be included in gross sales used to calculate percentage rent? See Note, “The Effects of Electronic Commerce on the Traditional Shopping
Center Lease”, 6 TEX. WESLEYAN L. REV. 85 (Fall 1999).
Page 3 of 27
of the lease is lengthy, (4) whether the tenant may sublet, (5) whether the tenant has rights to
fixtures, and (6) whether the lease contains a noncompetitive provision.”34
The date due35 and the amount of any security deposit36 or advance rent payment should be stated.
The lease may also require a letter of credit to secure performance of the tenant’s lease obligations.37
Late fees are being included in commercial leases38 and have been enforced.39
6. Utility and operating costs. Which party will pay for and provide utilities? What will be the
time periods for the providing of utilities?
34
Pequot Spring Water Co. v. Brunelle, 46 Conn. App. 187, 698 A.2d 920 (1997).
35
Unless otherwise agreed to by the parties, mailing rent is not receipt, that is, the “mail box rule” is not applicable to an existing
contract which does not incorporate it. Green v. Redfield, 6 Fla. L. Weekly Supp. 413 (Nov. 17, 1998).
36
Details regarding the status of the security deposit should also be included. Where a provision in a lease allows the landlord to hold
the deposit and apply it as security for payment and performance of the tenant’s lease obligations the deposit may be the property of the
tenant, but is under the control of the landlord who may, at its option, use the deposit to cover a lack of payment or performance by the
tenant. If the tenant is to have options in governing the deposit there must be applicable lease language, otherwise the tenant has no
control of the use or application of the deposit and may not, for example, reduce a payment due under contract and direct that the deposit
be applied to the debt. Safeguard Prods., Inc. v. U.C. Dev. Corp., 5 Fla. L. Weekly Supp. 13 (1997) (court cited residential statute for
the proposition that deposit is the landlord’s to control during tenancy).
37
See e.g. Coocen & Sons, Co., Inc. v. Rosenthal, 842 So. 2d 307 (Fla. 5th DCA 2003) where a standard security deposit clause also
included the following language:
To further secure the faithful performance by Tenant of the covenants, conditions and agreements set forth in this Lease,
Lessee shall furnish and provide to Landlord a $75,000.00 letter of credit from a financial institution reasonably acceptable
to Landlord, and in form and substance reasonably satisfactory to Landlord (“Letter of Credit”).
The tenant in Rosenthal defaulted on its obligation to provide a letter of credit. In the landlord’s action for breach the tenant argued the
landlord’s alleged failure to begin repairs required by the lease constituted a material breach that excused the tenant from delivering the
letter of credit. The court disagreed. Where the tenant never demanded the roof repairs be made and never raised the lack of roof repairs
as an excuse for failing to supply the letter of credit any failure to make roof repairs did not excuse the tenant’s failure to provide the
letter of credit.
38
See M. FRIEDMAN, FRIEDMAN ON LEASES at 34 (1989 supp.). Discussion of late fees is virtually nonexistent in the literature on
commercial leases. Friedman mentions the issue in passing without any evaluation. An example of a late fee provision in a commercial
lease can be found in the forms section at page 56.
39
Weinberg Props. v. Kenner, 117 A.D.2d 529, 498 N.Y.S.2d 144 (1986) (lower court properly granted summary judgment for unpaid
rent and $100 per month liquidated damages for late payments). See also Omni Quip of Jacksonville, II, Inc. v. Milo, Inc., 542 So. 2d
477 (Fla. 1st DCA 1989) (lessee should have been given notice of motion for writ of possession and an opportunity to pay the late penalty
5% and the sales tax on the penalty); Hood v. Peck, 269 Ga. App. 249, 603 S.E.2d 756 (2004) (lease plainly authorized collection of
late fees).
Page 4 of 27
Will the tenant be required to pay any maintenance or operating costs for the premises or for
common areas? What costs are to be assumed or shared, and how will these costs be ascertained?40
7. Taxes. Will the tenant be responsible for any taxes or other assessments on the demised
premises?41 The terms of any lease provision regarding the tenant’s responsibility for taxes must
not be unconscionable.42 Any tax arrangements between the parties should be stated clearly and
precisely in the lease contract, with tax terms defined.43 Note that an obligation to pay ad
40
See Adler v. Abramson, 728 A.2d 86 (D.C. App. 1999) where the lease provided for additional rent reflecting annual costs of
managing and operating the building. The fee was capped at 5% of gross collections. The lessee unsuccessfully argued that the fee
violated an implied covenant of good faith and fair dealing because it exceeded the “market rate.”
41
In Todora v. Venice Golf Association, Inc., 847 So. 2d 577 (Fla. 2d DCA 2003) the appellee operated a golf course on land it leased
from a municipality. By terms of the lease the appellee assumed all tax liabilities related to the property, but the property was assessed
in the name of the city. The court held that pursuant to state statute only the “taxpayer” had standing to challenge an assessment, and
the appellee was not the taxpayer under the statutory definition. Recognizing that its holding would effectively leave the appellee without
a vehicle to challenge a tax assessment it would ultimately have to pay, the court certified the following question as one of great public
importance:
DOES THE NONGOVERNMENTAL LESSEE OF GOVERNMENT-OWNED PROPERTY HAVE STANDING TO

CHALLENGE THE ASSESSMENT OF AD VALOREM TAXES ON THE PROPERTY WHEN THE PROPERTY IS NOT
ASSESSED IN THE NAME OF THE LESSEE BUT THE LESSEE IS CONTRACTUALLY OBLIGATED TO PAY THE
TAXES?
42
See, e.g.,, Brandt v. Dade Dental Ctr., 680 So. 2d 1063 (Fla. 3d DCA 1996) (where tenant occupied 2.4% of the leasable space but
was responsible, per a lease provision, for 15% of increased tax liability, lease provision was unconscionable and unenforceable).
43
Rudisill, A Commercial Lease Primer (With Forms), Prac. R. E. Law. (July 2013) (taxes should be defined to specify what types
of taxes, charges, and assessments are included and tenant may want right to contest amount of taxes). See also Thompson v. First Nat’l
Bank of Hollywood, 321 So. 2d 466 (Fla. 4th DCA 1975) (provision in lease calling for payment of taxes will not ordinarily encompass
special assessments). See also Valencia Ctr., Inc. v. Publix Supermarkets, Inc., 464 So. 2d 1267 (Fla. 3d DCA 1985); Oven v. Dawirs,
419 So. 2d 1186 (Fla. 1st DCA 1982); Roban Realty, Inc. v. Faile, 13 Conn. App. 584, 538 A.2d 242 (1988) (no provision in lease
provided that lessees would pay property tax on increases caused by improvements constructed by lessees); Newark Park Plaza Assocs.
v. Newark, 227 N.J. Super. 496, 547 A.2d 1163 (1987) (lease clause requiring school board as lessee to pay real estate taxes was not
against public policy, and was enforceable); Blount v. Denault, 27 Mass. App. Ct. 524, 540 N.E.2d 199 (1989) (rent adjustment clause
based on a certain percentage of any increase in real estate taxes contained a limitation that “… said increase shall not exceed $500 in
any one year during term of this lease.”—the court ruled this clause was not cumulative); Athans v. James Hardware, Inc., 43 Fla. Supp.
2d 214 (1990) (lease obligated tenant to pay proportionate share of increased ad valorem taxes where increase exceeded a certain amount,
but did not obligate landlord to appeal an increase in assessment or allocate expenses of an appeal; when landlord successfully appealed
assessment increase and allocated share of costs to tenant, court implied a contract requiring tenant to be responsible for expenses
incurred in securing the benefit); Jupiter Mall Realty Corp. v. Rosner’s, Inc., 607 So. 2d 491 (Fla. 4th DCA 1992) (tenant’s share of taxes
due even where the landlord had not paid them); Faith Freight Forwarding Corp. v. Panalpina Airfreight, Inc., 636 So. 2d 186 (Fla. 3d
DCA 1994) (lease clause obligating tenant to pay accrued property tax increases enforceable even though it was silent as to when landlord
was to demand payment); Beiger Heritage Corp. v. Montandon, 691 N.E.2d 1334 (Ind. App. 1998) (interpreting phrase “due and payable”
in lease provision requiring lessee to pay taxes); Association of Am. R.R. v. Connerton, 723 A.2d 858 (D.C. App. 1999) (lease requiring
subtenant to pay taxes based on ratio of subtenant’s total square footage to rentable square footage of building did not obligate subtenant
to pay taxes for garage); Charles D. Stein Revocable Trust v. General Felt Indus., 749 A.2d 978, (2000) (where lease provided that tenant
would pay “all taxes … arising by reason of the occupancy, use or possession of the premises,” Business Privilege Tax (BPT) and Net
Profits Tax (NPT) which were based on the landlord’s income did not arise from tenant’s occupancy, use or possession of premises and
lease terms only required tenant to pay taxes levied or assessed against real property or those arising from tenant’s actual physical control
Page 5 of 27
valorem taxes, although contained in a contract clause concerning covenants, remains an

obligation constituting consideration to use or occupy property and is considered “rent,” and
thus if the parties do not want payment of taxes to be part of the rent, they should specify that
in the lease.44 If the lessor is a government and the lessee is a private entity contracting to
improve the leased property, how the lease resolves the ownership interests in the improvements
will likely determine whether those improvements are exempt from ad valorem taxation.45
An unusual situation arose in Quietwater Entm’t, Inc. v. Escambia County.46 The County owned land
on Santa Rosa Island and leased it to the appellants. The County owned property was contained
within a Municipal Services Benefit Unit (MSBU), and the County levied a special assessment for
law enforcement and mosquito control in the MSBU. Despite case law holding that assessments
must confer a special benefit on the assessed property and that in general, law enforcement services
do not provide any special benefit to real property, the court upheld the assessment and distinguished
prior cases because the real properties at issue in those cases were also subject to ad valorem
taxation. In Quietwater, however, the leaseholds escaped ad valorem taxation. The case, while not
generally important to parties to commercial leases, does serve as a reminder that in addition to ad
valorem taxes, a lease may need to address special assessments.
of property); Double H Housing Corp. v. Big Wash, Inc., 799 A.2d 1195 (2002) (term “water rents” in clause captioned “Taxes and
Assessments” did not refer to a tax but to money paid for actual water consumption and therefore tenant had only to pay percentage of
cost set forth in lease clause rather than full amount under separate utilities clause); Fair Oak, LLC v. Greenpoint Fin. Corp., 810 N.Y.S.2d
504 (2006) (Base Assessed Valuation was defined in terms that did not allow for any future modification); Holiday Plaza Corp. v.
Cinemas of Miami, Inc., 469 So. 2d 183 (Fla. 3d DCA 1985) (where lease provided obligation for additional rent based on increased
taxes would commence when land was assessed by local taxing authority with full improvements or lease year commencing in 1982,
whichever first occurred, and land with improvements was first assessed in 1981, that was base year from which increase in taxes and
rent had to be calculated and 1982 was first year in which rent could be adjusted for increased taxes).
44
Cascella v. Canaveral Port Authority, 827 So. 2d 308 (Fla. 5th DCA 2002) (eviction under § 83.232 applicable to failure to pay ad
valorem taxes; payment of ad valorem taxes not merely covenant that was not part of rent).
45
Broward County v. Eller Drive Ltd. P’ship, 939 So. 2d 130 (Fla. 4th DCA 2006) (where lease did not expressly state which party
had ownership during lease term of building constructed by lessee on government land, court found sufficient indicia ownership in lessee
to require property to be subject to ad valorem taxation). See also Accardo v. Brown, 63 So. 3d 798 (Fla. 1st DCA 2011) (where lessees
were equitable owners of the real property owned by county, property was properly assessed ad valorem property taxes not only on
improvements located on leaseholds but also on underlying land).
46
Quietwater Entm’t, Inc. v. Escambia County, 890 So. 2d 525 (Fla. 1st DCA. 2005).
Page 6 of 27
47
8. Insurance: The parties may have to agree to a wide range of insurance coverage, including
fire, theft, and destruction coverage, and possibly public liability coverage and special insurance
coverages related to the unique nature of the commercial venture on the premises.48 If the
landlord purchases property insurance,49 unless the parties agree in “unequivocal terms” to limit
the tenant’s liability for negligence, the landlord’s insurer may be able to seek subrogation
against the tenant.50 However, where a lease expressly provided the lessor would purchase
property and casualty insurance and the parties agreed the lessee’s rent included its pro rata
share of the premium, those specific provisions plainly indicated the parties intended the risk of
loss be borne by the lessor’s insurer who could not maintain a subrogation action against the
lessee because the lessee was an intended beneficiary or co-insured under the lessor’s policy.51
47
See also Pincus, Casualty Clauses in Commercial Leases, LXVII, No. 6 Fla. B.J. 14 (June 1993). See generally Iwamoto, Insurance
and the Commercial Lease, Prac. Real Est. Law. (March, 2006).
48
Consider Gooding’s Supermarkets, Inc. v. Net Realty Holding Trust, 703 So. 2d 1136 (Fla. 5th DCA 1997) (lease requiring lessor
to maintain liability insurance on common area for $1,000,000 per occurrence not met where policy had $25,000 deductible and provided
coverage in aggregate); Sassano v. BLT Discovery, Inc., 245 N.J. Super. 539, 586 A.2d 307 (N.J. Super. 1990) (lease provision providing
that if tenant was insured against enumerated risks, the proceeds of the insurance would be paid to landlord, did not obligate tenant to
insure building against fire for benefit of landlord); Mitchell v. K.C. Stadium Concessions, Inc., 865 S.W.2d 779 (Mo. App. 1993) (absent
express provision in lease, there is no implied obligation on tenant to insure the premises); see also Johnny’s Seafood Co. v. City of
Tacoma, 73 Wn. App. 415, 869 P.2d 1097 (Wash. App. 1994) (insurer of commercial tenant not barred from asserting a subrogation claim
against the landlord for the landlord’s negligence where tenant has failed to comply with terms of lease); Wal-Mart Stores, Inc. v.
McDonald, 676 So. 2d 12 (Fla. 1st DCA 1996) (tenant found to have breached lease for failing to obtain liability insurance to protect
landlord); Cincinnati Ins. Co. v. Control Serv. Tech., Inc., 111 Ohio App. 3d 801, 677 N.E.2d 388 (1996) (where lease expressly obligated
lessee to purchase public liability insurance, but did not mention casualty insurance, it could be concluded that parties did not intend for
lessee to be responsible for fire damage); Seattle First Nat’l Bank v. Mitchell, 87 Wn. App. 448, 942 P.2d 1022 (Wash. App. 1997) (where
lease provided tenant would pay proportional share of insurance premiums to landlord, landlord obtained policy with large deductible
without notifying subtenant of deductible amount, landlord was self-insurer for amount of deductible and, therefore, subrogation waiver
relieved subtenant of liability for repairs costing less than deductible); Cambria-Stoltz Enters. v. TNT Invs., 747 A.2d 947, 2000 Pa.
Super. 52 (2000) (where lease provided that tenant would name landlord as co-insured on the liability policy, failure to name correct party
as co-insured was not small mistake or incidental error and constituted breach).
49
See Stein & Compton, Landlord’s Checklist of Silent Lease Issues, Prac. R. E. Law. (May, 2013) (recommending that landlord insure
tenant’s improvements and require tenant to reimburse allocable insurance cost—premium, co-insurance, all other insurance
costs—either directly as additional rent or as operating cost without base year; if landlord insures, tenant should be required to agree not
to do anything that would void landlord’s insurance or increase insurance risk).
50
In a residential tenancy, the landlord obtained the property insurance and, after a loss, the tenant argued that as an implied co-insured
under the landlord’s policy, the insurer could not seek subrogation against her because an insurer cannot seek subrogation against its own
insured or co-insured. The appellate court, however, did not agree. State Farm Fla. Ins. Co. v. Loo, 27 So. 3d 747 (Fla. 3d DCA 2010)
(where no provision in lease exculpated tenant from liability for own negligence, required landlord to maintain insurance for benefit of
tenant, or shifted any loss incurred as a result of tenant’s negligence to landlord, landlord’s insurer could proceed with subrogation action
against tenant because parties did not in “unequivocal terms” intend to limit tenant’s liability for her negligent acts).
51
Underwriters of Lloyds of London v. Cape Publ’ns., Inc., 63 So. 3d 892 (Fla. 5th DCA 2011) (insurer unsuccessfully argued that
lessee was required to indemnify it for loss because of lease indemnity and hold harmless provisions; court held that while general
provisions requiring lessee to obtain general liability insurance and indemnify and hold lessor harmless for its negligence were relevant
to determining which party should bear risk of loss, they were not dispositive).
Page 7 of 27
If the landlord intends for the tenant to carry fire insurance with the landlord named as a loss
payee or a named insured, the lease must explicitly state that requirement.52 A lease will often
require the tenant to provide specified coverage, but allow the landlord to obtain that coverage
if the tenant does not and to charge the premiums as additional rent. The problem for the
landlord under such a lease is confirming that the tenant has purchased the required coverage
in the required amounts. Confusion can result in their being no coverage.53 Additionally, the
landlord must be concerned that the tenant has not at any point canceled the coverage. To protect
the landlord, the lease will likely require the tenant to provide the landlord with proof—often
in the form of a certificate or duplicate original of the policy—that the tenant has obtained a
policy of the type mandated by the lease. In that case, even if the tenant obtains the necessary
insurance, if it fails to notify the landlord of the policy and the landlord purchases the insurance
itself, the tenant may be liable to the landlord for the cost of that insurance.54 If the lease
requires the landlord to be an additional insured, the landlord should, at least in theory, receive
52
In Brooks v. Green, 993 So. 2d 58 (Fla. 1st DCA 2008) the lease required the tenant to provide fire insurance coverage for the
tenant’s “fixtures, goods, wares, and merchandise in or on the leased premises” in an amount not less than $150,000 and coverage of
not less than 100% of the value of the leased property and other improvements, if coverage in that amount could be obtained. The
landlord claimed the tenant breached the lease by failing to name the landlord as an insured or a loss payee on the insurance the tenant
obtained. The appellate court did not agree and said that the lease agreement did not obligate the tenant to maintain insurance for the
benefit of the landlord. It only stated that the tenant was required to purchase fire insurance, “which he admittedly did.” A dissenting
opinion said that the only evidence of insurance in the record was coverage of the tenant’s “fixtures, goods, wares, and merchandise,”
but there was no record evidence of insurance on the leased property. The dissent would have affirmed judgment for the landlord. While
the disagreement between the dissent and the majority is a bit confusing, from the drafting standpoint, the case is clear: if the landlord
wants to be a named insured or a loss payee, the lease should clearly state that as a requirement. See also Husky Rose, Inc. v. Allstate
Ins. Co., 19 So. 3d 1085 (Fla. 4th DCA 2009) in which the insurance clause read: “The Tenant shall at all times maintain fire insurance
with extended coverage in the name of the Landlord and the Tenant, in an amount appropriate to cover the cost of replacement of all
alterations, decorations, additions, or improvements in the event of fire or extended coverage loss.” The court found that the clause may
have been waived where the landlord’s agent agreed that the tenant would not have to add the landlord to the policy until it came up
for renewal.
53
See, e.g., Mahsa, Inc. v. Al-Madinah Petroleum, Inc., 276 Ga. App. 890, 625 S.E.2d 37 (2005) where the lease required the tenant
to obtain comprehensive general liability insurance, personal property insurance, fire insurance, and all risks property insurance on the
premises and improvements. The tenant purchased inventory and liability insurance, but claimed that he did not understand he was
supposed to obtain other insurance. The landlord, believing the tenant had complied with the lease requirements for insurance, canceled
his policy. The property was destroyed by a tornado and was uninsured for casualty loss.
54
TAG 380, LLC v. ComMet 380, Inc., 10 N.Y.3d 507, 860 N.Y.S.2d 433, 890 N.E.2d 195 (2008). In Tag the lease requires the tenant
to furnish the owner/landlord with proof of insurance by a certificate or duplicate original of the policy not less than 30 days before
expiration of the current insurance policy. It also provided for the landlord to give notice of default with a 10-business-day cure period.
After the tenant notified the landlord of its insurance, the landlord claimed the policy was inadequate and gave notice of default. Not
until after the cure period terminated did the tenant inform the landlord that adequate coverage was in place. The landlord purchased
insurance for the property and in subsequent litigation between the parties the court said that even though the tenant purchased the
required insurance, by failing to disclose that information to the landlord, the tenant breached the lease, and had to reimburse the landlord
for any reasonable damages it incurred as a result of that breach.
Page 8 of 27
notice if the policy is canceled. The landlord needs to be aware of any exclusion in a policy
obtained by the tenant that applies when the property is considered “vacant” because if the
tenant ceases to use the premises, there may be no coverage. Additionally, if the property is in
a shopping center, vacancies in other parts of the shopping center may serve to nullify
coverage.55
Coverage for losses caused by hurricanes has become extremely problematic in Florida. It is difficult
to obtain and costly. This is a topic the parties should discuss in their lease negotiations, especially
in a shopping center where both parties are likely to carry policies covering a part of the property.
Landlords and tenants should be aware that policies of property insurance may not include
deductibles applying solely to hurricane losses unless “the deductible provision is clear and
unambiguous.”56 A policy with a separate hurricane deductible must state in boldfaced type no
smaller than 18 points that: “THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR
HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO
YOU.” A policy with a coinsurance provision applicable to hurricane losses must have a disclosure
reading: “THIS POLICY CONTAINS A CO-PAY PROVISION THAT MAY RESULT IN HIGH
OUT-OF-POCKET EXPENSES TO YOU.”57
55
See, e.g., JJD Assocs. of Palm Beach, Ltd. v. Am. Empire Surplus Lines Ins. Co., ___ F. Supp. 2d ___, 2011 U.S. Dist. LEXIS
134878 (Nov. 22, 2011). The defendant insurer provided property coverage to the plaintiff, a shopping center tenant. The tenant’s
premises was allegedly burglarized and vandalized. The tenant submitted a notice of loss and proof of loss, but the claim was denied
because the insurer concluded a vacancy exclusion applied. One dispute between the parties in the subsequent litigation concerned the
meaning of “building.” If building meant the shopping center as a whole, the vacancy provision would not apply because the portion
of the shopping center that was vacant for the required 60 days prior to the loss was not at least 31% of the entire shopping center as
provided by the policy. However, if building referred to each of the seven subdivisions of the shopping center individually, then the
vacancy provision would likely apply, said the court, because, arguably, at least 69% of premises was vacant for 60 days prior to the loss.
The court decided the only use to which the property was put during the period of “vacancy”—informal use of the premises to store tools
and sporadic entry by the agent for the center and maintenance personnel—was insufficient to prevent application of the vacancy
provision. The case illustrates how important it is to understand the policy language. Had the landlord been depending on coverage
obtained by the tenant to provide primary protection for the property and been unaware of the vacancy exclusion, the landlord could have
been left with no coverage or insufficient coverage.
56
Fla. Stat. § 627.701(2)(a).
57
Fla. Stat. § 627.701(4)(a). See RTG Furniture Corp. v. Indus. Risk Insurers, 616 F. Supp. 2d 1258 (S.D. Fla. 2008) (since absent
express penalty in statute, court is not at liberty to supply one, violation of mandatory statute by failure to insert required language in
policy does not, as matter of law, void Named Storm Occurrence deductible).
Page 9 of 27
The language of the lease requirement for property insurance will determine the extent of the
obligations of the parties.58 The lease requirement may be for either an all-risk policy—generally
covering all risks of physical loss except for perils specifically excluded—or a named-perils policy,
covering only specifically enumerated risks. Where the lease requires the latter, the mandate has not
been met when the policy excludes an event as an underlying cause of the named peril.59
Many tenants obtain leasehold insurance to protect themselves if the landlord’s title is invalid and
because it may be impossible to get financing for improvements without that insurance.60 The cost
of the insurance might be a subject of negotiations between the tenant and landlord.
9. Use: The parties may wish to state an express use for the premises.61 Will there be any
forbidden uses, restrictive covenants, or special conditions?62 When the real consideration for
a lease is totally dependent on commencement and continuance of mining operations by the
lessee, there is an implied duty on the lessee to mine, however, if the consideration is not “totally
dependent” on commencement and continuance of mining operations, the lessee does not incur
any duty to mine continuously.63
58
See e.g. Auto Owners Ins. Co. v. Southwest Nut Co., 564 Fed. Appx. 1002 (11th Cir. 2014) where the lease required the ten ant to
obtain and maintain “full insurance coverage for absolutely all losses, liabilities, damages, or claims that may occur in connection with
Tenant’s use of the Warehouse and Tenant’s obligations under this lease.” The court interpreted the language to mean that the tenant was
responsible only for fire losses “occurring in connection with its use of the warehouse—not for the warehouse generally.”
59
TAG 380, LLC v. ComMet 380, Inc., 10 N.Y.3d 507, 860 N.Y.S.2d 433, 890 N.E.2d 195 (2008) (where lease required tenant to “keep
and maintain” insurance for value of building against loss or damage by fire and other risks included under standard Extended Coverage
Endorsement for use with New York Standard Fire Insurance Policy, by purchasing policy that excluded all methods potentially used by
terrorists, including named perils in lease, from coverage tenant breached lease).
60
Morfopoulos, The Art of Reviewing a Leasehold Title Insurance Commitment, Prac. R.E.Law. (Jan. 2010).
61
In Westfield Ins. Co. v. Accessibility Specialists, Inc., ___ F. Supp. 2d ___, 2011 U.S. Dist. LEXIS 78222 (M.D. Fla. July 19, 2011),
the plaintiff alleged that by “written and/or oral agreement” the tenant “expressly and/or impliedly” agreed to maintain the leased
premises in a reasonable manner and to ensure that any work it performed was done in a “reasonably prudent manner” to ensure the
property was safe from risk of fire. It also claimed the tenant breached the agreement by failing to ensure that work it performed was
done in a reasonably prudent manner and that as a direct and proximate result of that breach, the plaintiff suffered damages. Those
allegations were sufficient to survive a motion to dismiss.
62
Is the landlord guaranteeing that the tenant will be able to use the property for a desired use? See Margolis v. Malesky, 515 So. 2d
425 (Fla. 4th DCA 1987). If a lessee expects use restrictions to be uniformly applied, the lease may need to so state. Venture Holdings,
Ltd. v. Carr, 673 A.2d 686 (D.C. App. 1996) (no relief for claim of selective enforcement).
63
White Constr. Co. v. Jones, 13 So. 3d 130 (Fla. 1st DCA 2009). See also Deerfield Rock Corp. v. McClellan, 121 So. 2d 822 (Fla.
2d DCA 1960), cert. dis., 127 So. 2d 892 (Fla. 1961).
Page 10 of 27
10. Preparation of the premises: The lease may contain a provision relating to the preparation of
the premises by the landlord,64 or the tenant’s right to possession during a “fixturing” or
preparation period. The contract may contain an express provision relating to the fitness of the
premises and the suitability of the premises for the intended commercial business.
11. Maintenance, repairs, and alterations: The maintenance and repair obligations of each party
should be stated in specific terms.65 Any special rights for either party should be stated
expressly. Does the tenant have any right to make alterations or improvements to the premises?
Are these rights limited?66 If the tenant is to make alterations, the tenant should be required to
comply with not only the federal Americans with Disabilities Act, but the comparable Florida
64
If the landlord is to make renovations to the property, the lease should state a date for completion of the renovations. A “time is of
the essence” clause may be insufficient to protect the tenant if the landlord’s delay in completing the work prevents the tenant from
occupying the premises. See e.g. 326–330 St. Armands Circle, LLC v. GEE22, LLC, 139 So. 3d 353 (Fla. 2d DCA 2014) (where landlord
was to remodel its property and install elevator, but contract specified no date for completion of renovations and only required the
landlord to “work diligently,” “Time is of the essence” clause was insufficient to find landlord breached lease contract when it failed to
complete renovations about 52 months after lease was signed).
65
See, e.g., Boudreau v. M & H Food Corp., 895 So. 2d 501 (Fla. 2d DCA 2005) (where lease provided tenant accepted premises “as
is” and placed obligation for repair and maintenance of premises on tenant, court erred in awarding tenant damages for cost of electrical
repairs made after city building inspector issued notice that building’s electrical wiring was in violation of city code); Wilkening v.
Watkins Distribs., Inc., 55 Wn. App. 526, 778 P.2d 545 (Wash. App. 1989) (court recommended lease should spell out type of roof
maintenance required of tenant and time table for repairs); Mullinax v. Doughtie, 196 Ga. App. 747, 396 S.E.2d 919 (Ga. App. 1990)
(ventilation system that would purge air of heavy cigarette smoke not standard equipment in commercial real estate intended for general
office purposes); Fresh Cut, Inc. v. Fazli, 630 N.E.2d 575 (Ind. App. 1994) (lease that did not expressly address maintenance of sprinkler
system imposed such duty on lessee by virtue of language in general clause on maintenance and repair).
66
See Winslow v. First Union Nat’l Bank of Fla., 639 So. 2d 86 (Fla. 1994). The court decided that the landlord’s right to refuse consent
for improvements to the property was “extremely narrow” where the lease contained the following clauses:
… Tenant shall make written application to the Landlord, or the Landlord’s designee, for approval of the plans … to be
constructed on the Demised Premises. Tenant shall not construct or make any improvements to the Demised Premises,
without prior written approval from the Landlord, or Landlord’s designee.
Tenant shall have the right, at its own cost and expense, to construct on any part or all of the Demised Premises, subject
to covenants, restrictions and easements of record, such buildings, parking areas, driveways, walks, gardens, and other
similar improvements necessary to carry out the business purposes of the Tenant … provided that the same shall be in
compliance with the Rules and Regulations of the Architectural Committee of Landlord and then applicable building codes
and ordinances.
Under these provisions, the court agreed that the tenant had a right to make improvements that conformed with applicable rules,
regulations and codes, and that the consent requirement implied “some” power on the part of the landlord to refuse consent. However,
the scope of that right was, said the court, unclear in the lease. See also Georgia Color Farms, Inc. v. K.K.L., Ltd. P’ship, 234 Ga. App.
849, 507 S.E.2d 817 (Ga. App. 1998) (notice to landlord did not satisfy requirement for permission to make improvements or constitute
mutual consent and therefore tenant could not shift liability for improvements to landlord).
Page 11 of 27
state statutes as well as any local laws on disabled/handicapped access.67 Failure to address
which party will pay for the costs of improvements required to make the premises useable for
the purposes for which the property is leased may render the lease contract ambiguous and
unenforceable.68
12. Common areas: What will be the tenant’s rights and obligations concerning common areas?
Common areas should be defined in definite terms.69 The landlord should reserve the right to
install security cameras or other security technology in common areas and the tenant should be
required to waive any right to object to them and any right to sue the landlord over privacy,
labor, or workplace issues that arise from their use.70 The control of common areas and the
responsibility for injury in common areas are important issues to consider in drafting a provision
relating to common areas. A great deal of personal injury litigation in the commercial landlord
and tenant setting involves the issue of control over common areas. Will there be a safe and
convenient entrance and exit for the tenant’s business customers? Are there any future plans for
the development of buildings in common parking areas? Will the landlord need the tenant’s
approval to build in a commercial parking area?71
67
Stein & Compton, Landlord’s Checklist of Silent Lease Issues, Prac. R. E. Law. (May, 2013) (landlord should be permitted to block
any alteration, even inside leased premises, if they might require any significant changes to space outside premises to comply with
disability laws).
68
Nielsen v. Gold’s Gym, 2003 UT 37, 78 P.3d 600 (Utah 2003) (while payment for tenant improvements would not be essential term
in every commercial lease agreement, particular facts persuaded court it was an essential part of the bargain to be reached in the case
before the court). See also JRK Franklin, LLC v. 164 E. 87th St. LLC, 27 A.D.3d 392, 812 N.Y.S.2d 506, appeal denied, 7 N.Y.3d 705,
819 N.Y.S.2d 872, 853 N.E.2d 243 (2006) (lease requiring landlord’s prior written consent for alterations that would “affect the exterior
of the building,” not violating by free-standing metal shed).
69
See, e.g., A & J Corporation III v VW II, L.P., 303 A.D.2d 430, 756 N.Y.S.2d 603 (2003); in which the gross leasable floor area
for purposes of calculating common area charges was described as follows:
In measuring the aggregate gross leasable floor area of the Shopping Center, all areas within the Shopping Center devoted
to Lessor’s storage, use, management and operation of the Shopping Center, Lessor’s equipment installations servicing
portions of the Shopping Center and office use shall be excluded, as shall areas located in mezzanines, and basement areas.
The court said the language was clear and unambiguous and expressly excluded basement areas from the calculation of the aggregate
gross leasable floor area of the shopping center for purposes of apportioning common charges.
70
Stein & Compton, Landlord’s Checklist of Silent Lease Issues, Prac. R. E. Law. (May, 2013).
71
See § 2.03[4] generally, regarding parking issues. See also Cafeteria Operators, L.P. v. Coronado-Santa Fe Assocs., L.P., 124 N.M.
440, 952 P.2d 435 (N.M. App. 1997) (good faith covenant may not be applied to set aside express provision of contract requiring consent
of tenant to change in parking area and obligate tenant to negotiate in good faith for change).
Page 12 of 27
13. Signs and advertising: The rights of the tenant as to the placement, maintenance, or
improvement of signs or advertising may need to be stated in the lease contract.72 The lease
contract might also require the tenant to provide advertising to the landlord.73
74
14. Construction provisions: Depending on the nature of the commercial venture, certain
construction provisions and express obligations may need to be stated in the lease contract. Will
one party be required to build on the premises? What are the specifications and the time limits?
The parties may wish to consider the consequences of unexpected delays or extra costs in
construction. The financing of the construction project may also need to be incorporated in the
lease contract, particularly in a large commercial project such as a shopping mall venture or a
free-standing building. If the lessor wants to prevent a lien from attaching to his or her interest
in the property for work done on behalf of a tenant, there must be language in the lease expressly
prohibiting liability, and the lessor must follow the requirements of Florida’s Construction Lien
Law.75
15. Relocation: Any rights of either party to relocate the premises should be stated specifically. A
relocation provision should explain the consequences of a relocation on rent payment and other
contract obligations.76
72
See Grentner v. LeJeune Auto Theatre, Inc., 85 So. 2d 238 (Fla. 1956). This covenant may include a provision protecting the
visibility of the premises’ signs. See, e.g., New Hampshire Donuts, Inc. v. Skipitaris, 129 N.H. 774, 533 A.2d 351 (N.H. 1987); Timber
Ridge Invs., Ltd. v. Marcus, 107 Ohio App. 3d 174, 667 N.E.2d 1283 (1996) (prohibition against restricting visibility of tenant’s sign
applied to “premises,” not to outlot). Ownership of signs might also be addressed. American Linens, Inc. v. Venmall Int’l Group, 645
So. 2d 1059 (Fla. 3d DCA 1994) (tenant who had made repairs to shopping center sign unsuccessfully sought civil theft damages after
landlord refused to give the sign to tenant at end of lease). See generally Stein & Compton, Landlord’s Checklist of Silent Lease Issues,
Prac. R. E. Law. (May, 2013) (landlord should control all rights to exterior signage; signage should only advertise tenant’s operation at
particular location, not tenant’s products or services generally; lease should require tenant’s signs to comply with signage criteria attached
as lease exhibit and give landlord right to remove signage temporarily for repair or compliance with law).
73
See, e.g., Bodygear Activewear, Inc. v. Counter Intelligence Servs., 946 So. 2d 1148 (Fla. 4th DCA, 2006) (landlord would construct
advertisement booth within airport for tenant to advertise its business and in exchange for ten-year lease term, tenant was to place sign
in booth advertising landlord’s business).
74
See Burbridge v. Therrell, 110 Fla. 6, 148 So. 204 (1933) (permanent fixtures annexed, actually or constructively, become part of
freehold estate); City of Homestead v. Johnson, 760 So. 2d 80 (Fla. 2000).
75
See § 8.06, infra.
76
Among the issues that should be included are: the amount of advance notice required from the landlord; the number of times a tenant
may be relocated; buildout of new space; any allowance for the tenant to improve the space; dimensions, configuration, and window line
of the new space; any rent adjustments required by an increase or decrease in space; and, the timing of the relocation both with regard
to the business cycle and the time of day of the actual move. Yi and Pinchot, Space and Term Issues in Commercial Leases (With Sample
Clauses), Prac. R.E.Law. (March 2007).
Page 13 of 27
16. Expansion: Will the tenant have any right to expand the premises? Will the tenant have a right
of first refusal to additional lease space?
17. Tenant’s option to renew the lease: If the tenant is to have an option to renew the lease term,
the conditions of the option including rent for the renewed term, should be stated.77 The time
period in which the option is available should also be stated.78 If the parties wish for the right
to renew to be in perpetuity, that language must be “unequivocal.”79 Language providing that
the landlord granted the tenant the right to extend the lease for “successive five (5) year periods”
was held to permit only two successive five-year renewals.80
18. Tenant’s option to purchase: Any option to purchase the premises or any right of the tenant to
a first refusal of a sale of the premises should be stated in specific terms.81 What will be the time
77
Is a renewal option that fixes the term but leaves the rental for future agreement valid and enforceable? See the discussion in chapter
6 accompanying notes 58 through 61, and especially the discussion of State Road Dep’t v. Tampa Bay Theaters, Inc., 208 So. 2d 485
(Fla. 2d DCA), cert. denied, 212 So. 2d 869 n.61 (Fla. 1968). In Heral v. Smith, 33 Ark. App. 143, 803 S.W.2d 938 (Ark. App. 1991),
the court said that an option in a written lease to renew upon terms to be agreed upon in the future is void for uncertainty, and a statement
that the amount of rental could not exceed the cost-of-living index was not objective enough to guide the court in fixing the terms of
the new lease and would not save the option. In Woodard Tire Co. v. Hartley Realty, Inc., 596 So. 2d 1114, 1116 (Fla. 3d DCA 1992),
the court said that a renewal is a continuation of the landlord-tenant relationship on the terms specified in the option to renew, or if no
terms are specified, then it is a continuation of the relationship on the same terms as the original lease.
78
Consider M.D. & Associates, Inc. v. Sears, Roebuck & Co., 749 S.W.2d 454 (Mo. App. 1988) (generally, if the lease specifies the
kind of notice and the manner in which it is to be given the terms must be complied with to bind the lessor to the exercise of the option,
but even if notice does not comply with the lease provisions, if it is actually received within the specified time, it is sufficient).
79
Hutson v. Knabb, 212 So. 2d 362 (Fla. 1st DCA 1968); Schroeder v. Johnson, 696 So. 2d 498 (Fla. 5th DCA 1997).
80
Schroeder v. Johnson, 696 So. 2d 498 (Fla. 5th DCA 1997).
81
For example, in Costello v. Curtis Bldg. P’ship, 864 So. 2d 1241 (Fla. 5th DCA 2004) the option to purchase clause read:
And the lessors do hereby grant to the lessees exclusive right at their option any time after the 25th year of the term of this
lease to purchase the said premises for the sum of Thirty Thousand Dollars … PROVIDED ALWAYS that the right of the
lessees to exercise the option of purchase is expressly created upon the faithful performance and observance by the lessees
of all the covenants, agreements and conditions on their part herein contained and the payment to the lessors of the rent
hereby reserved up to the date of the completion of the said purchase.
There was also a construction requirement clause with which the tenant failed to comply. When the tenant sought to exercise the purchase
option, the landlord refused. The tenant brought a legal action and the landlord counterclaimed seeking a declaratory judgment that the
purchase option clause had expired or terminated because the tenant had failed to comply with the lease provision requiring construction
of a building on subject property. The tenant argued the landlord waived the right to raise any challenge to validity of the purchase option
since she had continued to accept rent payments for more than 75 years without ever seeking enforcement of the lease provision that
required construction of a building. The court disagreed. To constitute waiver, contended the court, conduct must establish clear
relinquishment; while conduct may imply waiver, it must make out a clear case of waiver. It does not arise merely from forbearance for
a reasonable time. Accepting rent for 75 years constituted, in the mind of the court, sufficient evidence to support a conclusion the
landlord waived the right to assert failure to construct a building on the property as a basis to terminate the leasehold interest, but alone
was insufficient to support a conclusion the landlord waived the right to enforce the conditions precedent required for exercise of the
purchase option. See also Welde v. Top Video & Prods. USA, Inc., 35 So. 3d 119 (Fla. 3d DCA 2010) (lease granting lessee option to
Page 14 of 27
period of any right or option? How can a right or option be exercised, and what will be the terms
of payment?82 The parties may provide that if the option is not exercised until after a given date,
the price may increase by a set amount for each day up until closing.83 The purchase option may
leave the price to be negotiated by the parties when the tenant exercises the purchase option and
further provide that if the parties fail to agree, a board of appraisers will set the price.84
Provisions for title, taxes, insurance, and recording may also need to be included. The market
value of leased property at the time a lessee exercises an option to purchase is to be computed
as if the property were unencumbered by the lease unless a contrary intent is clearly stated in
the lease.85 Since a tenant must demonstrate its ability to perform and exercise the option in a
purchase property for prescribed price “… provided that the Lessee is not in default of any part of this Lease Agreement …” meant that
lessee could not be in default on date that it exercised option, not that lessee was barred from exercising option if it had ever, at any time,
been in default).
82
Consider Greco v. Corn, 724 So. 2d 612 (Fla. 2d DCA 1999) where the landlord objected to use of rent credit toward the purchase
price and brought a declaratory judgment alleging a lack of meeting of the minds in the formation of the purchase option clause.
83
In re Yates Development, Inc., 256 F.3d 1285 (11th Cir. 2001). In Yates the court found the following clause was not an
unconscionable liquidated damages provision:
12. TIME OF THE ESSENCE: Time shall be of the essence with respect to each provision of this Agreement that requires
action to be taken by either party within a stated period of time, or upon a specified date. Notwithstanding the foregoing,
if for any reason this Option Agreement is extended beyond August 15, 1998 and Appellant is entitled to exercise the Option
beyond the August 15, 1998 date, then the Purchase Price shall be increased by the sum of Five Thousand Dollars and
NO/100 ($5,000.00) per day for every day after August 15, 1998 until the ultimate Closing Date.
84
See Twelfth Ave. Invs. v. Smith, 979 So. 2d 1216 (Fla. 4th DCA 2008) where the purchase option read in part:
In the event the parties fail to reach an agreement as to purchase price within thirty (30) days from the service of the above
notice, a board of three (3) appraisers shall be appointed as follows: One (1) member by Lessor; one (1) member by Lessee;
the third member selected by the first two members of said board. The board of appraisers thereupon shall proceed to
appraise the premises and determine the fair market value thereof as the purchase price to be paid, and each of the parties
shall be bound by the findings of the board. If the Lessee is not satisfied by the findings of the board, at its election it may
withdraw its option exercise. Lessee shall bear the expense for the cost of its own and Lessors [sic] appraisal fees.
See also Skopelos Seafood & Steak Rest., Inc. v. Estate of Gus Silivos, 17 So. 3d 834 (Fla. 1st DCA 2009) where the appraisal clause
read:
In preparing the appraisal, the appraisers shall use the current fair rental value of the property, which value may be more,
but cannot be less than the existing lease payment being made at that time by Lessee. It is the intent of the preceding
sentence that the fair market value not be reduced because the existing lease is below market at that time.
The court noted that the lease clause used the phrase “current fair rental value” in one sentence and “fair market value” in the very next
sentence. The court concluded that these phrases presented two “distinct and seemingly disparate concepts of appraisal” and, therefore,
created a patent ambiguity.
85
Taylor v. Fusco Mgt. Co., 593 So. 2d 1045 (Fla. 1992); see also Napleton v. Ray Buick, Inc., 302 Ill. App. 3d 191, 704 N.E.2d 864,
235 Ill. Dec. 291 (Ill. App. 1998), citing Taylor and finding a clear intention against merger.
Page 15 of 27
suit against the landlord for repudiating the option,86 the tenant may want the lease to address
repudiation and to define “ability to perform and exercise.”
An option to purchase may be in an agreement that is separate from the parties’ lease agreement. The
fact that the documents are separate may have legal consequences. For example, a tenant sued for
specific performance of an option to purchase. The lease agreement between the parties included a
jury waiver. The separate purchase option did not. The defendant landlord moved to strike the
plaintiff’s demand for a jury trial based on the waiver in the lease agreement. The court denied the
motion finding reliance on the jury waiver in the lease agreement was misplaced because any waiver
with respect to the tenant’s rights under the separate option to purchase was not knowing, voluntary,
and intelligent.87
19. Bankruptcy: The consequences of the bankruptcy of either party may be incorporated in the
lease contract.88 However, the Bankruptcy Reform Act of 197889 has now rendered any lease
provision calling for a forfeiture or a termination of the lease when a tenant becomes insolvent
or has bankruptcy proceedings filed against him, ineffective with respect to the bankruptcy
trustee. Lease provisions requiring additional security or other protection for the landlord or
providing the lease is breached or terminated when the tenant files a bankruptcy petition are not
enforceable in bankruptcy law.90
A bankruptcy trustee has the right to assume a commercial lease, to assign the lease to a third party,
or to reject the lease.91 Shopping centers are given special treatment under the Bankruptcy Reform
Act, including special provisions for the adequate assurance of a rent source, the protection of
86
Summit Blvd. Animal Clinic v. Lemon Tree Plaza, 641 So. 2d 437 (Fla. 1994).
87
Toby’s Equine Rescue, Inc. v. Telecom Lease Advisors, LLC, ___ F. Supp. 2d ___, 2013 U.S. Dist. LEXIS 106417 (M.D. Fla., July
30, 2013) (court also noted action did not relate to plaintiff’s occupancy on subject property or parties’ relationship as tenant and
landlord).
88
See generally Resnick, “Letter of Credit as a Landlord’s Protection Against a Tenant’s Bankruptcy: Assurance of Payment or False
Sense of Security?” 82 Am. Bankr. L.J. 497 (2008).
89
11 U.S.C. §§ 101–1330.
90
Wanlass, Practice Tips: Analyzing the Basics of a Tenant Bankruptcy, 36 Los Angeles Lawyer 8 (2014).
91
11 U.S.C. § 363(k)(1).
Page 16 of 27
percentage rents, and the protection of exclusive uses and other rights.92 The Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 amended § 365(d)(4) addressed rejection of
unexpired leases of nonresidential property to the advantage of commercial landlords and to lenders
of debtors in possession.93
20. Consequences of default: The consequences of default should be spelled out in the lease
contract, including the consequences of the tenant’s default in rent payments.94 The consequences
of other breaches of contract,95 including the breach of any special provision such as the tenant’s
right to the quiet enjoyment of the premises or the landlord’s right to prevent the tenant from
committing waste on the premises, should be stated clearly.
21. Restrictive covenants: Any special use provision should be stated clearly, along with the
consequences of a breach of a special provision. A common special use provision gives a tenant
in a multitenant setting a right to the exclusive sale of certain products, such as a covenant
against competition in a shopping center lease.96 If a lessee wishes to enforce, as a third party
beneficiary, a restrictive covenant that appears, ostensibly for his benefit, in the lease of another
lessee, the covenant must be written to conform to the requirements of statute.97 Those
requirements are that the restrictive covenant expressly identify the lessee as a third-party
92
11 U.S.C. § 365(b)(3).
93
See Kirby, Unexpired Leases Under the New Bankruptcy Act: A Win-Win for Landlords and Lenders? 10 N.C. Banking Inst. 379
(2006) for an in depth discussion of the changes to § 365(d)(4). See also Wanlass, Practice Tips: Analyzing the Basics of a Tenant
Bankruptcy, 36 Los Angeles Lawyer 8 (2014).
94
See Coin Laundry Equip., Co. v. Gilbert, 597 So. 2d 926 (Fla. 1st DCA 1992). The lease agreement established as a condition
precedent to default for nonpayment of rent, notice of nonpayment to the tenant. Where there was no evidence of any notice, a suit for
breach of the lease was brought prematurely.
95
See also Royal Oak Landings Homeowners Ass’n v. Pelletier, 620 So. 2d 786 (Fla. 4th DCA 1993), dealing with construction of
ambiguous provisions.
96
Such restrictions can be quite specific. For example, one restaurant tenant in a shopping mall was protected by: a restriction on the
maximum square footage which could be leased for food or beverage operations; a right of first refusal for space proposed to be leased
for such purposes; and a requirement the lessor receive the lessee’s consent for certain food operations. SNB, Inc. v. Ehlers, 98 Or. App.
562, 779 P.2d 625 (Or. App. 1989). A covenant against competition usually covers a specific shopping center or commercial complex.
Tenant’s counsel may, however, want to consider a distance restriction precluding the lessor from renting to a competitor within a certain
distance of the premises. See, e.g., Thompson Dev., Inc. v. Kroger Co., 186 W. Va. 482, 413 S.E.2d 137 (W. Va. 1991) (lessor could not
lease to a food sales competitor of tenant within five miles of shopping center in question).
97
Tusa v. Roffe, 791 So. 2d 512 (Fla. 4th DCA 2001).
Page 17 of 27
beneficiary of the contract and expressly state that the restrictive covenant is intended for the
benefit of that lessee.98
Covenants against competition must be very carefully drafted. They are construed to extend
no further than the contract language absolutely requires, and doubtful or ambiguous
language is construed against restraint.99 In the shopping center situation the attorney
drafting certain exclusive rights must be careful to avoid the inclusion in the contract of any
methods of competition or trade practices that have been declared unfair or deceptive by the
Federal Trade Commission.
In 1976 Sears, Roebuck & Company entered into a consent order with the Federal Trade
Commission to cease to enforce contract rights prohibiting the entrance of a new tenant
to a shopping center, or controlling the amount of floor space of another tenant, or
controlling the merchandise offered or the pricing practices of another shopping center
tenant.100
22. Destruction, or frustration of purpose: 101 An express provision covering the consequences of
a destruction of the premises or a complete frustration of the purpose of the commercial lease
may be incorporated in the lease contract.102 Under what circumstances may the landlord
terminate the lease?103 What will be the conditions of restoration? How are insurance proceeds
to be distributed? Will there be a reduction or an abatement of rent? Under what circumstances

98
Fla. Stat. § 542.335(f)(1).
99
Riddick v. Suncoast Beauty College, Inc., 579 So. 2d 855 (Fla. 2d DCA 1991); MBD Enters. v. American Nat’l Bank of Chicago,
275 Ill. App. 3d 164, 655 N.E.2d 1061, 211 Ill. Dec. 678 (Ill. App. 1995) (term “principal business” did not apply to business which
received 15% of income from activity in dispute).
100
3 Trade Reg. Rep. P. 21, 218, File No. 7210081 (Oct. 28, 1976).
101
See also §§ 7.06 and 7.10, supra.
102
See, e.g., Arbor Advertising Corp. v. Grammatico, 530 So. 2d 364, 365 (Fla. 2d DCA 1988) (“In the event Lessee is unable to obtain
the required permits from all governmental agencies, this lease shall be null and void and of no force and effect and any consideration
exchanged in connection herewith shall be returned.”). A “damage to or destruction of improvements” clause can be the basis for a leased
property to be considered untenantable and for the lessee to terminate although continued occupancy and business activity may prove
tenantability. See Pomeranz v. McDonald’s Corp., 821 P.2d 843 (Colo. App. 1991); see also Tire Kingdom, Inc. v. Waterbed City, Inc.,
654 So. 2d 1005 (Fla. 3d DCA 1995), as discussed infra note 91.
103
See e.g. Covelli Family, L.P. v. ABG5, L.L.C., 977 So. 2d 749 (Fla. 4th DCA 2008) (lease clause permitted landlord to terminate
lease within 120 days following casualty if building was so damaged or destroyed that it would require expenditure, as estimated by
reputable contractor or architect designated by landlord in its sole discretion, of more than 20% of the full insurable value of building
immediately prior to casualty).
Page 18 of 27
will the lease terminate?104 Under what circumstances will the tenant be able to terminate the
lease on the grounds of frustration of purpose?105
104
See Restoration Obligations in Commercial Leases, Prac. R.E.Law. (May 2007) for sample early termination clauses. See also
ValuGym, Inc. v. PTC Props., Inc., 290 Ga. App. 281, 659 S.E.2d 700 (2008) where the lease contained the following early termination
clause:
Landlord agrees that after this lease has been [in] effect for twelve (12) months, Tenant may terminate this Lease prior to
its expiration should Tenant decide to close the fitness center in operation at the Premises. Should Tenant desire to exercise
this option, Tenant shall give Landlord ninety (90) days prior written notice. Tenant shall be responsible for payment on
a monthly basis of all rental and other payment obligations under this Lease during said ninety (90) day period and for a
period of twelve (12) months thereafter, unless landlord enters a new lease for the Premises with a third party and receives
monthly rental equal to or greater than that to be paid by Tenant under this Lease.
The ValuGym court held that under this lease clause, it was inconsistent for the tenant to argue that it terminated the lease and at the same
time contend that it continued to exercise dominion over the property by subleasing the premises.
And see Vt. Teddy Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 775 N.Y.S.2d 765, 807 N.E.2d 876 (2004) where the leased
premises were severely damages. A lease rider provided:
… if the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent and other
items of additional rent … shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the
date when the premises shall have been repaired and restored by Owner, subject to Owners right to elect not to restore the
same …
Additionally, the tenant’s liability for rent under the lease would resume five days after written notice from the landlord that the premises
were substantially ready for occupancy.
The rider that was incorporated in a lease contained a provision on casualty loss that gave the tenant a limited tenancy termination option
and required the tenant, if it wished to invoke the termination right, to:
… provide Landlord within thirty (30) days of the fire or casualty, a written notice of Tenant’s election to terminate the
Lease if the Premises are not restored within one (1) year after Owner’s receipt of such Tenant’s notice. In the event the
Premises are not restored within such one (1) year period the Lease shall be deemed terminated as of the end of the 12 mos.
and both Landlord and Tenant shall be released from all obligations which may arise after the Termination Date.
The tenant in the case sought to terminate the lease and argued it never received notice from the landlord that the premises were restored
and ready for occupancy. The landlord countered that the lease did not obligate it to provide written notice of restoration to avoid
termination. The court agreed and said according to the rider a casualty-based termination would occur only when, after receiving notice
of the tenant’s intent to terminate the tenancy, the landlord failed to restore the premises within one-year. There was neither an explicit
requirement that the landlord give the tenant notice the premises had been restored, nor any provision allowing the tenant to terminate
the lease for lack of notice.
105
See 1700 Rinehart, LLC v. Advance Am., Cash Advance Ctrs., 51 So. 3d 535 (Fla. 5th DCA 2010). The parties in Rinehardt entered
a lease on May 16, 2007 and, anticipating zoning problems with the property, amended it on August 13, 2007 to add that:
In the event Tenant, after using best efforts, is unable to obtain all permits and approvals necessary for Tenant to open and
operate its business in the Premises within ninety (90) days from the mutual execution of this Lease, Tenant shall have the
right, upon written notice to Landlord, to terminate the Lease, in which event all rents and deposits paid to Landlord shall
be refunded to Tenant provided, however, that Landlord shall have the right on behalf of Tenant to attempt to obtain all
permits and approvals for Tenant and if Landlord is unsuccessful, then Tenant shall have the right to terminate the Lease.
On January 14, 2008, the local government denied the tenant’s application for the necessary permit preventing it from operating its
business on the premises and the following day the tenant notified the lessor that it was terminating the lease, which was to have
commenced on January 20. The landlord claimed the tenant had failed to terminate within 90 days of executing the lease, as it said was
required, refused to return tenant’s security deposit, and brought suit for unpaid rent. The appellate court found for the tenant because
it had properly and timely invoked the termination provision. The court said the clear language of the clause showed the 90 day period
Page 19 of 27
23. Eminent domain: The consequences of a partial or a complete taking of the demised premises
through the process of eminent domain or by condemnation may be included in the contract.106
24. Conditions: Are there any special conditions to the commencement of the lease term? Are any
special permits or approvals needed? Must there be a change in the present zoning of the
property?107
25. Assignment and subleases: Any right of the tenant to assign or sublet the premises should be
stated in explicit terms108 with the rent obligations indicated.109 Landlords can expect that in
current market conditions, tenants will push for more flexibility in requirements for subleasing.110
referred to the tenant’s ability to lawfully conduct its business on the premises, not as, the landlord said, to its ability to terminate the
lease. The court added that under the landlord’s interpretation of the clause the tenant would have to have terminated on or before 90
days after the addendum was executed, but on that date the zoning application was still pending and the tenant would have had to abandon
its reasonable efforts to secure the ability to use the premises in the manner for which the parties contracted. The court would not “infer
that they intended such a self-defeating result.”
106
See supra § 7.08 for a discussion of the law on tenants and eminent domain. The absence of a lease clause does not preclude the
tenant from receiving compensation for leasehold land taken. In Trump Enters. v. Publix Supermarkets, Inc., 682 So. 2d 168, 170 (Fla.
4th DCA 1996), the court said:
… a lessee of land under a written lease agreement for a term of years is an owner of property in the constitutional sense
and is thereby entitled to full compensation for … a taking, notwithstanding the silence in such a lease.
See also Department of Transp. v. Idol, 114 N.C. App. 98, 440 S.E.2d 863 (N.C. App. 1994) (leased premises not rendered untenantable
where DOT took less than one of four acres; sufficient property remained for lessee to operate its business); Yazoo Props. v. Katz &
Besthoff No. 284, Inc., 644 So. 2d 429 (Miss. 1994) (breach of lease clause allowing tenant to pay reduced rent prevailed over eminent
domain clause when shopping center parking lot was partially taken for road construction).
107
Consider 6243 Jericho Realty Corp. v. AutoZone, Inc., 71 A.D.3d 983, 898 N.Y.S.2d 171 (2010) where a ground lease for property
on which the tenant planned to construct one of its standard buildings gave the tenant 210 days to obtain all authorizations, permits,
variances, and other approvals necessary for the intended use. If the tenant failed to obtain “approvals ‘necessary to assure that [its]
intended use and development of the Demised Premises will not be physically or financially impaired, as determined in [its] sole
discretion’ ” within the allotted time, the tenant could terminate the lease by furnishing written notice. The tenant notified the landlord
that, because of local regulations, it would be forced to either incur extra time and expense to obtain a special use permit or reduce the
size of the intended building and, therefore, it was terminating the lease. The court found the tenant to be in breach because, in effect,
it failed to make a good faith effort to obtain the necessary approvals.
108
See, e.g., Proctor v. La Val De Loire, Inc., 44 Fla. Supp. 2d 86 (1990) (lease agreement limited sublease to “another professional”
and parties disagreed as to intent of this language). Consider Holman v. Halford, 518 So. 2d 442 (Fla. 1st DCA 1988). The lease
authorized the lessee to “sublet the leased premises or any part thereof with the written consent of the lessor within ten (10) days after
the request of the lessee.” The lessee did sublet the property but without written consent from the lessor. The lessee was able, however,
to show that the lessor, by her actions, acquiesced to the subleases. The lease provision may have been stronger had its language said
the lessee could not enter into a sublease without first obtaining the written approval of the lessor, however, a lessor’s actions can almost
always override lease provisions regarding assignments and subleases. See supra § 6.01. Regarding a guaranty for performance by a
tenant, see Agarwal v. Pinnacle Realty Mgmt. Co., 718 So. 2d 947 (Fla. 5th DCA 1998).
109
A clear statement of rent obligations can be particularly important in the case of a percentage rent clause. Consider Vincent Co.
v. First Nat’l Supermarkets, 683 A.2d 360 (R.I. 1996) (where the percentage rent clause was extinguished by the terms of the lease as
a result of a sublease). A real estate broker is often involved in securing a sublessee. If the original lessee cancels its lease, what are the
rights of the broker to a commission? See Merin Hunter Codman, Inc. v. Wackenhut Corr. Corp., 941 So. 2d 396 (Fla. 4th DCA 2006)
(lessee breached sublease agreement and implied covenant of good faith; broker entitled to commission). Note Leesburg Cmty. Cancer
Page 20 of 27
26. Subordination of the lease: A provision addressing the rights and the obligations of parties
connected with the subordination of the lease may be included in the contract. If the tenant
agrees to a subordination of the lease, the tenant will want to be sure his or her right to
possession is not denied.
27. Surrender or abandonment: The parties may wish to include the consequences of the tenant’s
abandonment of the premises or the tenant’s surrender of the lease term.111 A clearly worded
“escape clause,” allowing the tenant to vacate the premises before the end of the lease term but
assessing a “penalty,” is enforceable.112 A sublessee may wish to have a non-disturbance
provision protecting it against termination of its rights in the event of a voluntary surrender by
the prime lessee.113
28. Landlord’s right of entry: 114 Will the landlord have any right to enter the premises? Are there
any existing easements, profits, or other uses of the premises that may affect the tenant’s
business?
Ctr. v. Leesburg Reg’l Med. Ctr., Inc., (Fla. 5th DCA 2007) (lease provision requiring lessee to make any sublease “subject to the terms
and provisions” of lease language simply means that any sublessee must agree to abide by all obligations of underlying lease).
110
Croudace, Negotiated Form of Landlord’s Consent to Sublease, Prac. R.E.Law. (Jan. 2010) (containing annotated sample consent
to sublease).
111
See Lalani v. Interamerican Sunbelt Corp., 31 Fla. Supp. 2d 53 (1988). In Lalani, the lease gave the lessor the right to cancel the
lease if the lessee “vacated or abandoned” the premises before the end of the term. The lessee closed his business but continued to pay
rent, utility bills, maintain some property on the premises, and protect the property with locks and an alarm system. The lessor claimed
the lessee had vacated the premises, but the court, relying on BLACK’S LAW DICTIONARY, said that to vacate meant to abandon entirely, not
to occupy for any purpose.
112
See, e.g., Bullseye Props. v. Weiler Engineeering Corp., 872 So. 2d 277 (Fla. 2d DCA 2004) where the lease provided:
1. TENANT shall notify LANDLORD at least Sixty (60) days prior to desire to vacate.
2. TENANT shall pay LANDLORD an additional Ninety (90) days rent prior to leaving along with applicable sales tax,
electric and other payments prescribed within the Lease.
The court found the language to be clear and unambiguous and to give the tenant an option to vacate early if it gave the appropriate notice
and paid three months’ additional rent.
113
See, e.g., Applebee’s Northeast, Inc. v. Methuen Investors, Inc., 46 Mass. App. Ct. 777, 709 N.E.2d 1143 (Mass. App. 1999)
(observing that such a clause might come with higher rent).
114
See also FLA. STAT. § 83.201, dealing with notifying a landlord of his failure to maintain or repair premises.
Page 21 of 27
29. Landlord’s right to change tenant’s location: Will the landlord have the right to change the
tenant’s location? Often in a shopping center situation the landlord may have such a right. Are
there any qualifications or limitations to this right?
30. Recordation of the lease: The parties may wish to have the lease recorded by the county
recorder, with the recording indicated in the contract. Who will be responsible for recording the
lease?
31. Good faith: An express good faith provision may be useful in a commercial lease contract,
particularly as there is no statutory requirement of good faith in the Florida nonresidential
landlord and tenant statutes.
32. Glossary of terms: To avoid unnecessary litigation, the express definitions of key terms or any
special terms to the contract should be considered.
33. Termination:115 Under Florida law, if a lease clause grants one party the unrestricted right to
terminate the lease at any time there is insufficient consideration for a contract.116 Some basis
for termination renders the contract enforceable,117 otherwise the contract may be terminated by
either party without liability for damages representing lost profits anticipated by the other
party.118
34. Hazardous Materials: The increasing awareness of the dangers of certain widely used
substances, e.g., asbestos, has led to lease clauses which address liability for hazardous
materials, existence of such materials on the site prior to the lease,119 the lessee’s use or right
115
See Chapter 7, supra. and Tiefer, “Forfeiture by Cancellation or Termination,” 54 Mercer L. Rev. 1031 (2003).
116
Pick Kwik Food Stores, Inc. v. Tenser, 407 So. 2d 216 (Fla. 2d DCA 1981), petition denied, 415 So. 2d 1361 (Fla. 1982); Margolis
v. A.J. Side Mtg. & Trust Co., 20 Fla. Supp. 2d 136, 137 (1986).
117
In re Alchar Hardware Co., 759 F.2d 867, 868 (11th Cir. 1985) (“… the lease provides for termination only if the lessor decides
to remodel, alter or demolish all or part of the premises, gives 60 days written notice, and returns any security deposit. This is enough
to render the contract enforceable.”).
118
See Blumberg v. Nealco, Inc., 307 S.C. 537, 416 S.E.2d 211 (S.C. App. 1992) (where lease agreement provided for payment of
future rents, termination did not release the lessee from future rent obligation).
119
See in this regard Youngblood, Environmental Traps for the Commercial Lessee, 12 PRACTICAL REAL EST. LAW. 65 (1996).
Page 22 of 27
to produce hazardous materials, and the cleanup of these materials if spilled.120 In drafting such
a clause the attorney needs to pay careful attention to the definition of hazardous materials,
particularly with regard to any laws which apply to those materials and which may speak to
liability questions that the lease may need to address or modify.
35. Cure Provision: A provision providing a reasonable time for a tenant to cure an alleged breach,
including nonpayment of rent, is a permitted lease clause. A clause was recently upheld which
provided that a dispute had to be resolved before a default could be declared against a tenant,
and, if there was litigation over the dispute, the litigation had to be resolved prior to a declaration
of default. The clause had the effect of providing the tenant a reasonable time to cure a
deficiency once its exact nature had been determined.121
36. Condition of Premises: The lease may provide that the premises are in a “fit” or “suitable”
condition for use by the tenant.122 Such language has been found to require the landlord to
deliver premises that are appropriate, suitable, and meet the requirements for the stated use.123
37. Dissolution: Where a lessee is a corporation, its dissolution does not necessarily constitute a
breach. If the parties wish the lease to terminate upon the corporate lessee’s dissolution, a lease
provision should so state. While a covenant against dissolution may be implied if the lessor
120
J.W. Mays v. Snyder Fulton St., LLC, 69 A.D.3d 572, 893 N.Y.S.2d 162 (2010) (lease made tenant responsible for any structural
or other changes, alterations, or additions to any buildings on demised premises necessary to comply with ordinances and regulations
of local, state, and federal governments and tenant failed to make prima facie showing that it had no obligation under lease to abate
potential hazardous materials at premises; abatement of hazardous materials may constitute structural change).
121
Pizza U.S.A. v. R/S Assocs., 665 So. 2d 237 (Fla. 4th DCA 1995).
122
A lease might also contain an “as is” clause. In Lee v. Perez, 120 S.W.3d 463 (Tex. App. 2003), there was a lease provision under
which the tenant accepted the property “as is.” It read:
CONDITION OF PREMISES. Tenant has examined and accepts the leased premises in its present as is condition as suitable
for the purposes for which the same are leased, and does hereby accept the leased premises regardless of reasonable
deterioration between the date of this lease and the date Tenant begins occupying the leased premises unless Landlord and
Tenant agree to repairs or refurbishment as noted in Special Provisions.
The tenant leased the property to operate a used car lot. After entering the lease, the tenant discovered a restrictive covenant limited the
property to residential use. The landlord argued the “as is” clause was a defense to the tenant’s action for breach of contract. The court
disagreed and said that lease provisions might waive express or implied warranties, but the one in Perez related to the physical condition
of the property a physical examination would reveal. The deed restriction was not a “condition” of the premises, and it would not be
disclosed by an examination of the property.
123
See, e.g., McDuffie v. Argroves, 230 Ga. App. 723, 497 S.E.2d 5 (Ga. App. 1998) (whether pre-existing termite infestation rendered
premises unfit presented question of fact for jury).
Page 23 of 27
relied on the financial dependability of the lessee in entering the lease (if, for example, the lease
contained a guarantee of net worth), such an outcome is not assured, and the lessor would be
better served by an explicit lease clause addressing dissolution.124
38. Arbitration:125 The parties may want to require that disputes be submitted to arbitration.126 The
arbitration clause may also define or limit the issues which may be arbitrated.127 Careful
attention needs to be given to any limitations.128
39. Anti-waiver clause: Anti-waiver clauses are generally enforced by Florida courts,129 although
an anti-waiver clause itself may be waived.130
124
See, e.g., Hood Bros. Partners, L.P. v. USCO Distribution Servs., 140 F.3d 1386 (11th Cir 1998) (where lease did not address
dissolution and permitted assignment and subleasing and lessee subleased and later assigned lease prior to dissolution, lessor could not
treat dissolution as breach).
125
See generally Hanzman, Arbitration Agreements: Analyzing Threshold Choice Of Law and Arbitrability Questions an Often
Overlooked Task, 70 FLA. BAR J. 14 (December 1996); Zabak, Enforceability of Commercial Agreements to Arbitrate Future Disputes:
Judicial Alteration of the Florida Arbitration Code, 30 U. FLA. L. REV. 615 (1978).
126
Consider Doctors Assocs. v. Thomas, 898 So. 2d 159, (Fla. 4th DCA, 2005) where there was a franchise agreement—containing
an arbitration clause—between the appellant and appellee. There was a lease between the appellee and an entity related to the appellant.
The lease contained no arbitration clause. The appellant argued the landlord was its agent and the arbitration clause should be extended
to it. The appellate court acknowledged that non-signatories may be bound to an arbitration agreement under principles of contract law
and agency, but found nothing in the trial court record addressing the matter. It remanded for a determination of whether parties the
appellant claimed as agents were entitled to the benefits of arbitration.
127
An arbitration clause in a residential retirement community lease illustrates the importance of defining terms. In BKD Twenty-One
Management Co., Inc. v. Delsordo, 2012 Fla. App. LEXIS 18985 (Fla. 4th DCA, October 31, 2012) (not final at time of publication)
the lease provided that “any claim or dispute (including those based on contract, negligence or statute) amongst the Parties, involving
an amount in excess of $15,000, arising out of or related to this Agreement, the Establishment or the services/care provided to the
Resident, shall be resolved by binding arbitration.” There was no definition of the word “establishment.” The tenant fell in a common
area and was injured. He brought a negligence action against the landlord. The landlord moved to compel arbitration pursuant to the lease.
The motion was denied and the landlord appealed. On appeal the tenant argued in effect that his claim did not arise out of or relate to
the landlord’s “establishment” because the word meant “ruling class” or “controlling group” and, therefore, referred to those running the
community. The landlord countered that the term meant “place of business.” The appellate court agreed with the landlord and, indeed,
said the tenant’s interpretation of the term was not a reasonable one. While the landlord eventually prevailed, it was only after arguing
before both a trial and appellate court. Had the word establishment been defined, or replaced with a more definite phrase, the case might
well have gone immediately to arbitration.
128
Consider Ocwen Fed. Bank FSB v. LVWD, Ltd., 766 So. 2d 248 (Fla. 4th DCA 2000). In Ocwen additional rent could be charged
for operating expenses. Whether an item was properly included in operating expenses was an arbitrable issue. A dispute arose over the
method by which the landlord calculated additional rent. Calculation of additional rent did not, argued the landlord, involve a question
of whether an item should be included in operating expenses and therefore was not subject to arbitration. The court agreed.
129
See e.g. Philpot v. Bouchelle, 411 So. 2d 1341 (Fla. 1st DCA 1982); Eskridge v. Macklevy, Inc., 468 So. 2d 337 (Fla. 1st DCA
1985); Glover Distributing Co., Inc. v. F.T.D.K., Inc., 816 So. 2d 1207 (Fla. 5th DCA 2002). See also Nat’l Home Cmtys., L.L.C. v.
Friends of Sunshine Key, Inc., 874 So. 2d 631 (Fla. 3d DCA 2004) where an anti-waiver clause provided in part:
No provision of this Agreement shall be deemed waived by either party unless same is expressly waived in a writing signed
by the waiving party. No waiver shall be implied by delay or any other act or omission of either party. No waiver by either
Page 24 of 27
40. Anchor tenants: In a shopping center or mall an anchor tenant is a large facility, usually a
grocery or department store, that attracts business to the property. Because of the importance of
an anchor tenant, its lease may include special rights and obligations. Its lease may specify the
kinds of other tenants that will be allowed, or it may grant the anchor tenant the right to veto
selection of other tenants.131 The anchor tenant may agree by its lease covenants to continue
operation of the store during the entire lease term or, more commonly, to pay rent as fulfillment
of the lease obligation, even if it ceases operation. That lease clause may apply only to the
named anchor tenant or to its successors and assigns as well. The leases of other tenants in the
shopping center may allow those tenants the option to cancel their lease if the anchor tenant—or
its successors or assigns—ceases to lease and pay rent for the use of its store.132
party of any provision of this Agreement shall be deemed a waiver of such provision with respect to any subsequent matter
relating to such provision.
130
See § 3.09, supra.
131
Veto power presents anti-trust concerns. See § 2.03[7], supra.
132
Note Jenkins v. Eckerd Corp., 913 So. 2d 43 (Fla. 1st DCA 2005) (failure to include reference to “successors and assigns” does
not render lease ambiguous and will allow tenant to terminate its lease if named anchor tenant ceases operation). In Jenkins the lease
clause read as follows:
Lessor represents to Lessee that Lessor has entered into leases with the following named concerns: with [anchor tenant] for
a minimum of 45,000 square feet for supermarket grocery store and that Lessor will construct and offer for lease individual
retail shops for a minimum of 21,000 square feet for various retail uses, all located and dimensioned shown on the attached
Plot Plan, … Lessor further represents that said [anchor tenant’s] lease is for leasing and paying rent by [anchor tenant] as
designated hereinabove in the Shopping Center, all as shown on the Plot Plan, Exhibit “A”, the lease to [anchor tenant]
being for a minimum period of 20 years, and said lease obligates [anchor tenant] to initially open for business in the
Shopping Center for the use as indicated above and to lease and pay rent for their store substantially to the same extent as
is required of Lessee; that [anchor tenant] has not been granted any right or privilege of terminating such lease during the
primary 20 year term thereof under any circumstances more favorable to [anchor tenant] than those granted to Lessee
herein. The continued leasing and payment of rent for their store in the Shopping Center by [anchor tenant] is part of the
consideration to induce Lessee to lease and pay rent for its store, as hereinafter described on the Leased Premises as a part
of the Shopping Center. Accordingly, should [anchor tenant] fail or cease to lease and pay rent for its store in the Shopping
Center during the Lease Term as hereinafter set out, Lessee shall have the right and privilege of: (a) cancelling this Lease
and of terminating all of its obligations hereunder at any time thereafter upon written notice by Lessee to Lessor, and such
cancellation and termination shall be effective ninety (90) days after the mailing of such written notice; … It is specifically
understood that Lessor shall be obligated to immediately notify Lessee in writing should [anchor tenant] fail or cease to
lease and pay rent for such a store in the Shopping Center during the primary term of this Lease, but any failure of Lessor
to notify Lessee thereof shall in no way deprive Lessee of its privilege of canceling this Lease and terminating all of its
obligation hereunder.
Page 25 of 27
41. Fraud: In an early case,133 the Florida Supreme Court rejected a lease clause in which the
parties stipulated that no fraud had been committed and neither party relied on the representations
of the other made prior to execution of the contract. The court said that no party may contract
against liability for fraud. While, said the court, a contract may be made incontestable because
of fraud, that is different from an agreement that no fraud had been committed.
42. Waiver of Jury Trial: A lease may include a jury waiver clause. These clauses are enforceable,
however, the waiver must be “knowing, voluntary, and intelligent.” Thus, where a plaintiff
tenant sued for, inter alia, specific performance of an option to purchase and the lease agreement
between the parties included a jury waiver, but the separate purchase option did not, the court
denied the defendant landlord’s motion to strike the plaintiff’s demand for jury trial based on the
waiver in the separate lease agreement. The court found reliance on the jury waiver in the lease
agreement was misplaced because any waiver with respect to the plaintiff’s rights under the
option to purchase was not knowing, voluntary, and intelligent.134
43. Estoppel Certificates: Many lenders will require an assurance from a tenant that a lease is in
full force and effect before lending money to the landlord secured by the leased property. In a
shopping center or mall the lender may require the assurance from all or a certain percentage
of the tenants or only a major or anchor tenant. A prospective purchaser of the property will also
likely require that assurance. Thus, modern standard form leases often require tenants to provide
“estoppel statements” within a prescribed number of days of a request from the landlord.135 If
the tenant signs the requested estoppel certificate, it ordinarily cannot later deny that the
representations made were true and correct at the time they were made. A basic estoppel
certificate generally asks the tenant to provide information about the lease term, the amount of
133
Oceanic Villas, Inc. v. Godson, 148 Fla. 454, 4 So. 2d 689 (1941) (if lease was procured by fraud and misrepresentation as to
material fact, truth or falsity of which was known only to lessor and which if proved would be sufficient basis for decree of recission,
then fraudulent misrepresentation vitiated every part of lease contract and lessee was not bound by clause stating no fraud had been
committed and no misrepresentation relied on).
134
Toby’s Equine Rescue, Inc. v. Telecom Lease Advisors, LLC, ___ F. Supp. 2d ___, 2013 U.S. Dist. LEXIS 106417 (M.D. Fla., July
30, 2013) (plaintiff’s claims were specific performance of option to purchase, breach of option to purchase, promissory estoppel,
intentional interference with advantageous business relationship, and conspiracy to defraud; court noted action did not relate to plaintiff’s
occupancy on subject property or parties’ relationship as tenant and landlord).
135
See generally Jacobson, Estoppel Certificates: A Review Checklist From a Tenant’s Perspective, 30 Prac. R. E. Law. (May, 2014).
Page 26 of 27
rent, and the amount of the security deposit. Sometimes a statement about any amendments,
supplements or modifications to the lease will be required. It is also common to require
assurances that the landlord has not defaulted under the lease, the tenant has no claims or
defenses to enforcement of the lease, and that no action, voluntary or involuntary, is pending
against the tenant under federal or state bankruptcy or insolvency laws. The language of an
“estoppel certificate” clause may be simple, but sweeping. For example: Failure of the tenant to
deliver a requested statement within the prescribed time will be conclusive on tenant that this
lease is in full force and effect, without modification except as represented by the landlord, there
are no uncured defaults in performance by the landlord, and no more than one month’s fixed
minimum rent has been paid in advance.
Florida Commercial Landlord Tenant Law
Copyright 2015, Matthew Bender & Company, Inc., a member of the LexisNexis Group.
Page 27 of 27

1-8 Florida Commercial Landlord Tenant Law - 8.02

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

1-8 Florida Commercial Landlord Tenant Law - 8.02

Uploaded by

Copyright:

Available Formats

1-8 Florida Commercial Landlord Tenant Law § 8.

§ 8.02 Subjects to Consider21*

contract, including the respective capacities of the parties.23

based on a percentage of sales? Will there be a rent escalation clause?32

fixtures, and (6) whether the lease contains a noncompetitive provision.”34

time periods for the providing of utilities?

DOES THE NONGOVERNMENTAL LESSEE OF GOVERNMENT-OWNED PROPERTY HAVE STANDING TO

valorem taxes, although contained in a contract clause concerning covenants, remains an

HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO

OUT-OF-POCKET EXPENSES TO YOU.”57

a lease is totally dependent on commencement and continuance of mining operations by the

any duty to mine continuously.63

approval to build in a commercial parking area?71

of first refusal to additional lease space?

to renew to be in perpetuity, that language must be “unequivocal.”79 Language providing that

was held to permit only two successive five-year renewals.80

committing waste on the premises, should be stated clearly.

to be distributed? Will there be a reduction or an abatement of rent? Under what circumstances

lease on the grounds of frustration of purpose?105

possession is not denied.

assessing a “penalty,” is enforceable.112 A sublessee may wish to have a non-disturbance

the prime lessee.113

there any qualifications or limitations to this right?

particularly as there is no statutory requirement of good faith in the Florida nonresidential

landlord and tenant statutes.

special terms to the contract should be considered.

liability questions that the lease may need to address or modify.

deficiency once its exact nature had been determined.121

an anti-waiver clause itself may be waived.130

option to purchase was not knowing, voluntary, and intelligent.134

Florida Commercial Landlord Tenant Law

You might also like