Accelerated Rent Clauses in Commercial Leases: Drafting and Enforcing Liquidated Damage Clauses

Recording of a 90-minute premium CLE webinar with Q&A

Conducted on Tuesday, April 14, 2020

Recorded event now available

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Course Materials

This CLE course will discuss best practices for landlords to draft enforceable accelerated rent clauses in commercial leases. The program will also discuss potential defenses to these claims by tenant's counsel when the strict criteria for application are not met.

Description

Most commercial leases include provisions that provide for accelerated rent to be paid by the tenant to the landlord in the event of a default. Although such arrangements may be standard, the ability to enforce them is often difficult if the contract terms do not abide by the most typical restrictions imposed by law.

Counsel must ensure the contract criteria for accelerated rent meets all required factors, which are typically an explicit declaration in the lease that the breach would create damages difficult or impossible to estimate when executing the contract. Further, counsel must communicate that parties intend for these provisions to serve as damages and not penalties. Finally, the damages must be a reasonable estimate of the probable loss.

Drafting enforceable language in these cases requires skill and understanding of what courts will need to move forward. An assertive defense of these claims may limit the majority of a tenant's potential liability in the event of a default. Therefore, landlords' and tenants' counsel must understand and review these provisions.

Listen as our authoritative panel of commercial real estate practitioners discusses drafting and negotiating accelerated rent provisions that meet criteria for enforcement and provides practical tips regarding pre-commencement improvement, build-out, and functional maintenance and repair, as well as indemnification provisions to allocate risk.

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Outline

  1. Criteria for enforcement
    1. Difficult or impossible to estimate damages at time lease is signed
    2. Damages vs. penalty
    3. Reasonable pre-estimate of probable loss
  2. Defenses to enforcement
  3. Practical tips for drafting

Benefits

The panel will review these and other essential matters:

  • What elements are included in an enforceable accelerated rent clause?
  • How can a tenant best defend again a claim for accelerated rent and what grounds exist to negotiate these clauses?
  • What are best practices for drafting accelerated rent provisions?

Faculty

Kelly, John G.
John G. Kelly
Shareholder
Bean Kinney & Korman

Mr. Kelly focuses his practice on general corporate law and real property law, including commercial real estate...  |  Read More

Watt, Brian
Brian P. Watt
Partner
Troutman Sanders

Mr. Watt represents clients in a wide variety of matters, with an emphasis on complex litigation and commercial real...  |  Read More

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