The twenty year building boom in Metropolitan Atlanta has left the city with a glut of retail and commercial office space. This has driven down rental rates in submarkets throughout the city. It has also caused landlords to offer massive incentives to potential new tenants. At the same time, the economy has put pressure on businesses of all sizes. Many businesses are struggling to make rental payments that only a few years ago seemed competitive.
Some small businesses will choose to simply walk away from their lease obligations. Taking this step without consulting with an attorney could devestate your business. Worse, in some situations, a landlord may have the option to come after your personal assets.
In Georgia, a residential landlord is required to mitigate damages when a tenant breaks their lease. This means that the landlord must actively seek a new tenant to replace the one that left. The tenant who defaults on their lease will only be obligated to pay for those months where the landlord was unable to find a new tenant.
Commercial landlords in Georgia have no duty to mitigate. Thus, a commercial landlord can simply allow a property to remain vacant until the end of the lease term and sue the tenant for the unpaid rent. Further, almost all commercial leases we review have acceleration clauses that allow the landlord, upon breach of the lease, to immediately bring suit for all of the future unpaid rent. Typically, these leases will also have clauses allowing for the payment of interest and the landlord’s legal fees.
If you are thinking about breaching a lease, we suggest that you hire an attorney to negotiate a release with your landlord. Litigation is expensive, and most landlords will seek to avoid it if possible.
Larsen & Teusink, PC represents both landlords and tenants in all matters related to commercial leases. This includes negotiation, drafting, analysis, and litigation. If you have questions or concerns related to a commercial lease matter, please visit our website or call us at 678.553.2923.
Posted under Business Law, Landlord Tenant, Real Estate Law
This post was written by Eric Teusink on March 24, 2010
