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Financial Event of Default - Example Free Information On Financial Event of Default - Example Most landlords and most tenants act reasonably. However, some people are unreasonable. Consider the following example. Office space is leased at a fixed rental rate agreed upon 5 years ago. The contract rent is $15 per square foot but the market rent has increased to $22 per square foot. The lease continues for another 5 years at the same rental rate. Due to a clerical error, the tenant forgets to send a rent payment one month. The tenant has an exemplary history of timely payment for the previous 5 years. However, this is an event of default on the lease. Instead of calling the tenant to inquire regarding the current month's rent, the landlord sends the tenant a notice of default. The notice of default informs the tenant the leases been terminated and demands the tenant vacate the premises within 30 days. What is Reasonable? A reasonable solution is for the landlords to provide written notice in the event of a default. The tenant should have a reasonable period of time to cure the default. This issue becomes more complex when it is not possible for either the tenant for the landlord to cure the default. What if Landlord Can't Perform? For example, a lease includes an affirmation by the landlord to comply with local laws and regulations. However, city council retroactively increases the parking requirements. (The number of parking spaces required per 1000 square feet of space.) This issue is being intensely litigated by local office building owners. However, final resolution of the litigation is not expected for three or four years. Should the tenant have the right to terminate the lease in this situation? Dispute Resolution Most office space leases address the venue for resolving disputes between the tenant and landlord. In most cases, the venue is state district court in either the location of the office property or where the landlord is headquartered. The former is prevalent. There's a growing trend to require binding arbitration for disputes. The advantage it is a less expensive process to resolve differences of opinion. The disadvantage is forgoing some of your rights for a process which can be even more arbitrary than state district court. Next Chapter Leasing Office Space - Right to Terminate
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