DEFAULT REMEDIES
Contact Neufeld Legal for commercial leasing legal matters at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com
Commercial real estate lease agreements, functioning as long-term contracts for the occupation and use of property, dedicate substantial attention to outlining the process and consequences of a default. Default remedies are the pre-negotiated, contractually defined mechanisms that become operable when either the tenant or the landlord fails to meet a material covenant, such as paying rent, maintaining the property, or adhering to use restrictions. The primary purpose of these clauses is twofold: to provide a predictable roadmap for dispute resolution, and crucially, to ensure that the non-defaulting party can recover the benefit of their bargain and mitigate future financial exposure. By clearly stipulating the actions available, from simple cure notices to termination rights, these provisions provide certainty into what would otherwise be a complex and protracted legal conflict.
The most extensive set of default remedies typically vests in the landlord, primarily addressing the tenant's material breach, most commonly the failure to pay rent (monetary default) or violating lease covenants (non-monetary default). The landlord's available remedial actions are generally structured around two critical objectives: financial recovery and repossession. Financial remedies include the right to accelerate all unpaid rent for the remainder of the term, the right to indemnification for costs incurred during default (legal fees, re-leasing costs), and drawing on security deposits or letters of credit. The ultimate and most potent remedy is the right to terminate the lease and judicially regain possession of the premises through eviction. Crucially, almost all actions require the landlord to strictly follow specific cure periods, defined windows of time that allow the defaulting party to rectify the breach before the harsher remedies, such as termination, are triggered.
Conversely, the tenant’s remedies for a landlord's default, while equally important, are often more narrowly defined and difficult to invoke. A tenant's recourse typically arises from the landlord's failure to maintain essential services (such as HVAC or structural repairs) or the breach of the covenant of quiet enjoyment. Tenant remedies may include the right to seek damages, the ability to offset rent against the cost of a necessary repair (if explicitly permitted by the lease), or, in cases of severe and persistent breach, claiming constructive eviction to justify lease termination. This remedies framework is always viewed through the lens of contract law, meaning both parties are generally subject to the duty to mitigate damages. For the landlord, this means a duty to make reasonable efforts to re-lease the space after a tenant default, ensuring that the recovery sought does not unjustly enrich the landlord at the tenant's expense.
For knowledgeable and experienced legal representation in negotiating, reviewing and drafting lease agreements, and protecting your business’ legal rights thereunder, contact lease lawyer Christopher Neufeld at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or Chris@NeufeldLegal.com.
