commercial lease default notice

What is a Default Notice in a Commercial Real Estate Lease?

A default notice is a document served to a tenant or landlord to notify them that they have not complied with one or more obligations in their lease. Something important to note about a default notice is that it is NOT an eviction notice, but it would be unwise to ignore it because the consequences could be significant. The purpose of the document is to let a party know what the particular problem is and a time frame in which it needs to be remedied. If the problem isn’t remedied within the specified period then action may be taken. What sort of action is taken? That depends entirely upon the scenario and the way the lease is written.

The most common default notice is served to tenant’s is for non-payment of rent, however, there are many more reasons a tenant may receive such a notice. To name a few other potential issues that could require a default notice would be to repair damage caused to the property by a tenant, to comply with parking requirements as per the lease, to cease an activity that isn’t permitted in the lease etc. The type of action that would be taken by a landlord if a tenant doesn’t remedy a default really depends on the scenario and the wording of the lease, but, failing to remedy a default that a landlord considers to be a serious issue could have some significant consequences such as eviction and/or legal action. If you have been served a default notice by your landlord it would be wise to start some dialogue as you work towards your solution. Ignoring such a notice would give the landlord the impression you aren’t even making an attempt to correct the problem which would likely motivate them to take serious action at the earliest possible opportunity.

Can a Landlord be served a default notice? Yes. While most commercial leases are worded to be pro-landlord (because it’s their property) there should be wording that also protects the tenant to ensure the property functions as it should in order for the tenant to operate their business as intended. An example of a default notice a tenant can serve the landlord is if a landlord has not completed work stated in the lease, for example if the landlord fails to install roughed in plumbing they promised in the lease then the tenant can service notice to the landlord to remedy that. The types of action a tenant can take if a landlord defaults varies depending on the type of issue and the wording of the lease.

While there are many reasons a default notice can be served, it shouldn’t always be the first action taken especially for non-serious issues. Most times some regular communication between landlord and tenant can prevent problems from forming to begin with and having that kind of landlord/tenant relationship is ideal to maintain if possible.