Real Estate Alphabet Soup: N is for Notice

Miles & Stockbridge P.C.

In my last post, “Real Estate Alphabet Soup: M is for Force Majeure” I continued my primer on the “alphabet soup” of real estate. This post continues to stir the “alphabet soup” with the letter “N.”

N is for “Notice.” Every real estate contract or lease should include a paragraph containing “notice” provisions. Notice provisions typically will include the name, address and contact information for where and how any notice should be provided when required under the terms of the contract or lease. In addition, the “notice” provisions will specify how and what method of delivery will constitute valid legal notice and receipt, by the other party to the agreement. For example, notice may be considered valid only if delivered by certain means, such as hand delivery, overnight courier (e.g. FedEx, UPS), or certified mail with return receipt. If specified, notice may also be considered valid by regular mail after allowing a certain number of days for delivery, or via facsimile or electronic mail.

The terms of the contract or lease usually will provide certain instances when “notice” is required. In a lease, for example, the lessor may be required to provide notice to the lessee of any payment of rent not timely received before charging a late fee. Additional notice may also be required after any subsequent cure period and before the lessee can be considered to be in default under the lease terms, whether it is a monetary breach for failure to pay rent or other charges due under the lease, or the failure to cure some other breach, such as the requirement to maintain the leased premises in good condition or to provide any required insurance coverage. Ultimately, if a default is not cured, lessor may be required to provide notice of its intent to terminate the lease. Or in the case of a contract, if any breach of the contract terms are not cured, then a party could provide notice to terminate the contract.

Notice may also be required in other unforeseen circumstances, such as the current COVID-19 coronavirus pandemic. Unexpectedly, lessees in certain “non-essential” businesses have been required to close their businesses, or reduce or modify the way they operate their business, resulting in a significant loss of revenue. As a result, some lessees suddenly find themselves unable to pay rent, and may need to provide notice to the lessor of a request to defer or modify the rent requirements under the lease. Conversely, in order to preserve their rights under the lease, lessors may need to provide notice to the lessee of the late rent, or other default, in order to preserve the right to collect on damages, at a later time, if the parties cannot successfully resolve the issue. And if the lessee can’t pay the rent, it could negatively impact the lessor’s ability to pay any outstanding debt on the property. So in turn, the lessor may need to provide notice to its lender to request to defer or restructure its loan payments.

Now more than ever, parties need to review their agreements to ensure they are providing proper and valid notice to other parties, whenever such notice may be required. With proper notice and communication, a situation can often be satisfactorily resolved between the parties. Without proper notice; however, one may end up in default, or in court, and that is generally not a good place to be.

In my next post, I will move on to the letter “O”, the next letter in this real estate “alphabet soup.”

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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