Even in the best economic times, a tenant may fail to timely pay their rent. When payment arrives late or does not arrive at all, commercial landlords have only as much protection as is given to them under the lease. For that reason, it is important to make sure you understand and comply with the terms of the lease dealing with late or missed payments.
Cure Periods
Many commercial leases require that a tenant be given an opportunity to “cure” the non-payment of rent or other charges due under the lease. This gives the tenant a short period of time (typically 5-15 days) to submit payment to the landlord. If the tenant fails to pay the landlord on the due date set forth in the lease, the landlord should send a written notice to the tenant to (i) remind them of their obligation to pay rent and (ii) notify them that the timeline for “curing” the non-payment of rent has begun.
Default
Most commercial leases also provide that if rent is not paid within the “cure” period, then the tenant will be in default of the lease. Once a tenant is in default, the landlord may have specific remedies which often include the right to take legal action to recover the overdue payments. Many leases require that the tenant be given formal written notice before they can be considered to be in default, so it is important to make sure you comply with all notice requirements in your lease.
Mutual Resolution
In most cases, non-payment of rent or other charges can be resolved by discussion between the parties. Two ways landlords often work with tenants are by (i) reaching an agreement to repay the unpaid rent over an extended period of time, or (ii) extending the term of the lease to allow for additional time to repay the overdue rent. In many cases, reaching an agreement with the tenant is the most cost effective and efficient way to address payment issues, since the cost of litigation and potentially finding a new tenant can be expensive and time consuming.