Self-help remedies in commercial leases are important because they provide parties with legal alternatives to address breaches of lease agreements by the non-performing party without resorting to lengthy and costly court proceedings. These remedies empower parties to take action quickly and efficiently in case of non-compliance, which helps protect rights and interests in the property and/or leasehold.
Below is a non-exhaustive summary of reasons why self-help remedies are essential in commercial leases:
- Enforcement of Lease Terms: Self-help remedies allow parties to enforce the terms and conditions of the lease, ensuring that parties adhere to their contractual obligations. If breaching parties know that the other party may be reluctant to enforce lease terms, out of a desire to minimize legal fees and court costs, non-performing parties may have an improper incentive to act in bad faith with respect to their timely performance of obligations under the lease. Parties need to know that meaningful repercussions exist for failure to perform on a timely and consistent basis.
- Cost-Effectiveness: Going through the legal system can be expensive, time-consuming, and burdensome for both parties. Self-help remedies offer a cost-effective and expedited alternative for resolving certain lease violations.
- Speed and Efficiency: Initiating legal action is rarely the ideal or most efficient approach, particularly if that is the only remedy available to the aggrieved party. Self-help remedies allow parties to address breaches promptly without the need to wait for court dates or legal proceedings. This enables them to resolve issues and mitigate potential damage more efficiently.
- Preservation of Relationship: In some cases, the relationship between the landlord and tenant can still be salvageable. By using self-help remedies, the landlord can address minor breaches without escalating the situation to a legal dispute, potentially preserving a positive working relationship. Certain mechanisms, such as late charges and penalty interest can financially incentivize parties to perform and/or minimize repeated defaults, rather than the initiation of adversarial proceedings for every issue.
- Minimizing Losses: When a party violates the lease agreement, it may lead to financial losses for the performing party. Self-help remedies can help minimize these losses by addressing the issue swiftly and preventing further non-compliance.
Self-help remedies must be exercised within the boundaries of the law and the lease agreement. Not all breaches can be addressed through self-help remedies, and in some jurisdictions, certain actions may be prohibited or restricted. Commercial leases frequently allow a period in which the breaching party is notified and given the opportunity to cure the default before self-help remedies may be utilized. Commercial leases often provide self-help remedies for (a) landlords to (i) change locks, (ii) remove the tenant’s property from the premises, and (iii) apply security deposits, and (b) tenants to (i) perform repairs and maintenance and repairs on behalf of the landlord and (ii) offset such expenses against rent or be reimbursed by the landlord.
Exercising self-help remedies is not without risk, in that there are opportunities for procedural missteps. Before resorting to self-help remedies, parties should familiarize themselves with local laws and consult with legal professionals to ensure they act within the confines of the law and the lease agreement. Incorrectly implementing self-help remedies could expose either party to legal liability.