What Are the Landlord’s Remedies When a Tenant Breaches a Commercial Lease?

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In California, commercial tenants generally have several additional obligations that go beyond paying the monthly rent. This may appear to benefit landlords, but it can also mean significant losses in case the tenant decides to default on the lease. An experienced northern California real estate attorney will be able to explain the available legal remedies for recovering damages if your tenant defaults on the terms mentioned within the commercial lease.

Type of Commercial Lease Breach

The first step a landlord should take when a tenant breaks the commercial lease is to determine the type of default or breach that has occurred under the law. A seasoned real estate attorney can provide the right legal advice in this matter.

There are different remedies available depending on the nature of the default. Breach of commercial lease usually falls into two categories:

  • Monetary default: This is where the tenant fails to fulfill contractual obligations, such as rent or utility payments.
  • Nonmonetary default: This is where another contractual obligation is breached, such as failure to have proper insurance, damaging the property, or using the property for unintended or non-permitted use.

You should note the terms of your particular lease agreement since many of these allow you to convert non-monetary lease agreements to monetary in nature. For instance, if you agree to repair the damage caused by non-monetary defaults, you can add the cost to your tenant’s rent. It can be harder to enforce remedies to nonmonetary defaults as compared to monetary ones.

Remedies Available to Commercial Landlords in California

Landlords can take further action if a commercial tenant fails to remedy the breach within a reasonable or applicable notice period. The primary decision that needs to be taken by a landlord is to whether end the lease and evict the tenant or preserve the relationship while still recovering damages.

Preserve the lease

Landlords in California have four primary remedies when they want to preserve the lease agreement:

  • Distraint: Landlords (usually with a bailiff) are allowed to enter the premises and seize goods of a value matching the outstanding monies owed. Strict rules are in place to govern distraint. You may be exposed to liability for damages if these rules are breached.
  • Damages: The tenant can be sued by the landlord for monetary damages resulting from the tenant’s default.
  • Injunction: This is a court order which forces an individual to stop doing something. The landlord may seek an injunction for stopping a tenant from using the leased premises for operating a business that is not permitted through the lease, for example.
  • Specific performance: Commercial landlords can seek an order for specific performance in certain circumstances. These force the tenant to act in a specific manner. For instance, the tenant may be required to repair damages as per the order.

Terminate the lease

You may decide to terminate the landlord-tenant relationship, in which case you have three available remedies that can be used together or separately:

  • Forfeiture: Written notices are provided by the landlord for the purpose of lease termination. This remedy is usually enforced to prevent a tenant from entering the premises.
  • Writ of possession: This court order allows the bailiff to take possession of the property on behalf of the landlord. It’s useful in situations where it is not practical to physically exclude the tenant from the premises.
  • Damages: The landlord may choose to seek damages as a result of the lease termination. This usually involves lost future rent payments. Taking this into account, the landlord also has a duty to minimize losses by finding another tenant quickly.

Claiming Monetary Damages for a Breach of Lease in California

Tenants are liable for rent owed under the lease terms if they breach a lease. This includes compensation for losses as a result of failure to perform property maintenance and other obligations. Damages for unpaid rent will include any arrearages for the time that has already passed.

Under California law, landlords are allowed to recover:

  • Unpaid rent that is already owed.
  • Difference amount from the rent of a new tenant going forward if it is less than the defaulted lease. This difference can only be collected for the remainder of the lease term.

It’s critical to understand that monetary damages are limited by the landlord’s duty to reduce damages. This duty states that a landlord is not allowed to let their rental property sit for a lease term if they could have found a new tenant.

Watch Out for Waivers

Your right to terminate a lease may be considered waived if your tenant can prove that you knew of the breach but acted as if the lease was still in effect. For instance, the tenant can argue that you have willingly accepted the breach if you continued to accept rent. This is constituted as a waiver of the breach.

Get a Trusted Real Estate Attorney on Your Side

The experienced attorneys at Peterson, Martin & Reynolds will assess various aspects of your commercial lease default to find the most effective legal strategy going forward. Our attorneys are dedicated to helping property owners that have been wronged by their tenants. To request your confidential consultation with us, call (415) 849-2564 or write to us online

Court Grants Equitable Easement Giving Exclusive Use of Property to Neighbor

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The recent Romero v. Shih case provides a keen reminder of the risks to home buyers unaware of lot lines and historical uses of real property.

The Court of Appeal, Second District, reversed in part and affirmed in part the trial court’s ruling granting an implied easement and an equitable easement for exclusive use of property containing a fence and driveway.

Two adjacent property owners sued each other over the right to use an 8-foot-wide strip of land between them. Years earlier, the owner of both properties had applied for a lot line adjustment, which was conditionally approved by the City of Sierra Madre but never finalized or recorded by the owner. The owner obtained a survey, built a fence on the intended lot line and used the strip as a driveway. After both lots had been transferred several times to separate owners over the years, it was discovered that the fence and driveway on Lot A were encroaching on Lot B.

Romero, the owner of Lot B, sued for trespass and to quiet title to the strip of land. Shih, the owner of Lot A, cross-complained seeking an easement to use the land. There was no dispute that Romero owned the land at issue. The evidence showed that removal of the encroachment would have severely limited Shih’s use of the driveway and parking area on Lot A, and that alternatives such as moving one side of the residence were expensive and unreasonable. The trial court ruled that Shih had an exclusive implied easement and an equitable easement to use the strip as it had been used historically.

The Court of Appeal reversed in part and affirmed in part.

An easement gives a nonpossessory and restricted right to a specific use or activity upon another’s property. When there is no writing confirming the easement, an implied easement can arise in limited circumstances. An implied easement gives effect to the intent of the original parties to grant use of real property in the same manner and to the same extent as it was being used at the time of the transfer of property. Exclusive implied easements, which in effect strip the servient tenement owner of the right of use, are disfavored and rare.

In this case of first impression, the Court held that an exclusive implied easement, which for all practical purposes amounted to fee title, was not justified because Shih’s encroachment did not meet the requirements of being either de minimis or necessary for safety or public utility purposes.

On the other hand, the Court affirmed the grant of an equitable easement, which gives a court discretion to protect the encroacher’s continued use and award damages where there has been no legal right to encroach. This remedy requires factual findings of (1) innocent trespass by the encroacher; (2) no irreparable injury to the property owner; and (3) disproportionate hardship to the trespasser. Here, Romero had never used the strip and provided no evidence of actual plans to do so. The actual harm to Shih if the encroachment were removed far outweighed the hardship to Romero from keeping it in place.

PMR Webinar – DRE Complaints, Investigations & Outcomes: What Brokers Need to Know

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Peterson Martin & Reynolds LLP’s 22nd Annual Managing Brokers Program!

This essential webinar presentation on the California Department of Real Estate’s complaint process includes topics such as how licensees get onto the DRE’s radar, the anatomy of DRE investigations, options available to the DRE when addressing violations of the laws they enforce, addressing rules violations, best practices to protect against DRE complaints, being familiar with and prepared for potential corresponding civil litigation, and more.

April 20, 2022

12-1:30pm

Peterson, Martin & Reynolds LLP Successfully Defends Residential Homeowner Clients from Meritless Nondisclosure Claims

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In January 2022, Peterson, Martin & Reynolds LLP obtained a judgment affirming an arbitration award on behalf of its clients finding in their favor and awarding PMR’s clients $240,953 in attorney fees and costs.  The case involved home buyers’ allegations that PMR’s clients had concealed dry rot throughout the framing of an extensively renovated hillside home when they sold the Point Richmond, California home to the buyers.  Although the buyers did in fact discover extensive dry rot when they attempted to remodel the home, PMR’s clients denied they had any actual knowledge of the dry rot condition when they sold the home to the buyers.  After a 4-day arbitration hearing, the Arbitrator ruled in favor of PMR’s clients, denied the buyers’ claims and awarded PMR’s clients $240,953 in attorney fees and costs for having to defend the claims.

Peterson, Martin & Reynolds LLP Wins $2,159,692 Arbitration Award for Residential Homeowner Clients

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In April 2022, Peterson, Martin & Reynolds LLP obtained a Final Arbitration Award for residential real estate clients in the amount of $2,159,692.  In 2016, PMR’s clients had purchased a 3,139 square foot home in an upscale neighborhood in Lafayette, California. The home was built in 1947, and was sold as being on a private, secluded and secure 1.4 acre lot.  The seller of the lot failed to disclose that a pathway that ran through the property had served for decades as a popular, well-travelled trail to the surrounding community. The purchase contract called for arbitration of any disputes. PMR’s lawyers filed for arbitration on behalf of the clients, alleging non-disclosure by the seller. After an 8-day arbitration hearing, the Arbitrator found the seller had intentionally failed to disclose the public’s historical use of the pathway through the property, and awarded $2,159,692 to PMR’s clients, including compensation for diminution in value, loss of use and enjoyment, out-of-pocket remodeling expenses, and attorney fees and costs.

Peterson, Martin & Reynolds LLP Obtains $2+ Million Settlement for Commercial Landlord Client

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In January, 2020, Peterson, Martin & Reynolds LLP obtained a settlement for a commercial real estate client for $2,103,745.  PMR’s client had leased a 31,320 square foot biotech facility in Foster City, CA for 10 years to a leading international biotech company.  When the biotech company moved out, it failed to properly restore the premises, which delayed and interfered with the client’s ability to re-lease the premises.  The lawyers of  Peterson, Martin & Reynolds LLP sued on behalf of their commercial landlord client.  After protracted litigation, including two unsuccessful appeals by the biotech company lawyers, the biotech company settled the case before the scheduled February, 2020 trial.