| By: Shawn Dhillon, Esq. – February 10, 2021 |
One of the most commonly used commercial leases in California is the AIR CRE lease (“AIR lease”). There are many versions of the AIR lease depending on the type of commercial property involved, such as a shopping center, office building, or an industrial building. It can also depend on whether the building is a multi-tenant or a single-tenant building. All of the AIR leases refer to the landlord as “Lessor” and the tenant as “Lessee.” Generally, if Lessee breaches the lease the Lessor’s recoverable damages are similar under all of the AIR leases.
If Lessee does not perform an obligation in the AIR lease, the Lessee typically has the right to cure its default. If Lessee fails to cure its default on time (or if the default cannot be cured), the Lessor may terminate the Lessee’s right to possession of the premises and pursue Lessee for the following damages:
- Rental loss for the period prior to termination of Lessee’s right to possession;
- Rental loss for the remainder of the lease term. However, this is subject to Lessor’s duty to mitigate damages by attempting to lease the premises to another party;
- Free rent previously enjoyed by Lessee, which is commonly negotiated in commercial leases;
- Other concessions Lessor provided to Lessee, which may include the cost of tenant improvements or the value of a tenant improvement allowance;
5. Brokerage commissions applicable to the unexpired term of the Lease;
- Cost of recovering possession of the premises;
- Lessor’s expenses of re-leasing the premises, which may include necessary renovation and alteration of the premises;
- Reasonable attorneys’ fees incurred by Lessor; or
- Other amount necessary to compensate Lessor for all the detriment proximately caused by Lessee’s breach.
Assuming the above items were not modified at the time the lease was negotiated and drafted, the Lessor can pursue all these damages from a Lessee that breaches the AIR lease. Of course, whether Lessor will be able to recover the amounts described above depends on whether the Lessee (or any Guarantor) has sufficient assets.
Commercial leases can be very complex. If you need assistance with any commercial lease, be sure to contact an experienced commercial real estate attorney that help you fully understand your lease and your best legal options. Real Estate Law Corporation™ advises landlords and tenants on all issues related to commercial leases.