Commercial Lease – Options for Commercial Landlord with Defaulting Tenant
If you are entering into or negotiating a commercial lease, the terms of the lease matter. For example, as a commercial landlord, if you want to accelerate rent of a defaulting tenant, you need to have an acceleration provision in the commercial lease. When you accelerate rent of a defaulting tenant, you are demanding the tenant pay the lease payments for the unexpired and unaccrued portion of the lease, i.e., the remainder of the lease term.
This was the issue in a recent commercial landlord and commercial tenant dispute – Hourglass Entertainment, LLC v. NRG Investments, Inc., 50 Fla.L.Weekly D1538a (Fla. 2d DCA 2025), where the appellate court reversed the trial court’s acceleration of rent because there was not a provision in the commercial lease allowing the landlord to do so (and there was otherwise no legal basis):
“As a general rule in Florida, rent will not be accelerated and future rent is demandable only in the amounts and at the time specified in the lease.” That is, “[s]ince future rent is demandable only in the amounts and at the times named in the lease, the total cannot be recovered at law in a lump sum in advance of the accrual of the installments” absent a provision in the lease that allows for such an award. The parking lot lease undisputedly contains no acceleration clause or similar provision. There was therefore no contractual basis to award accelerated rent for the four-month period between the date of the amended final judgment and the date of the expiration of the parking lot lease.
Hourglass Entertainment, supra (internal citations omitted).
Moreover, as a commercial landlord, there are THREE OPTIONS when a commercial tenant breaches before the lease term expires:
[T]he law provides a landlord with only three options when a tenant breaches before the lease term expires. A landlord may (1) “treat the lease as terminated and resume possession of the premises, thereafter using the same exclusively as his own for his own purposes”; (2) “retake possession of the premises for the account of the tenant, holding the tenant in general damages for the difference between the rentals stipulated to be paid and what, in good faith, the landlord is able to recover from a reletting”; or (3) “stand by and do nothing, and sue the lessee as each installment of rent matures, or for the whole when it becomes due.”
Hourglass Entertainment, supra (internal citations omitted).
Notably, if the commercial landlord elects the second option, there is “no authority that allows a landlord to recover future, unaccrued rent when it elects this option.” See id. Indeed, when a landlord elects the second option (a very common selected option), “the leasehold estate remains in existence,” and the landlord can hold the tenant liable for the difference between the rent the tenant should have paid and any substitute rent the landlord is able to recover. A landlord has a corresponding duty to mitigate its damages in that scenario, and it must undertake good faith efforts to relet the premises.” See id.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.
