Don't Forget the Boilerplate: Not All Standard Miscellaneous Provisions Are Standard

Force Majeure

For example, numerous variations of the Force Majeure provision exist. The following is one example of a force majeure provision taken from a tenant-friendly lease:

If Tenant is delayed or prevented from performing any of its obligations under this Lease by reason of strike, lockouts, labor troubles, failure of power, riots, insurrection, war, acts of God, or any other cause beyond Tenant's control, the period of such delay or such prevention shall be deemed added to the time period herein provided for the performance of any such obligation by Tenant.

Note that this provision refers only to situations in which the tenant is excused from performance of its obligations. No mention is made of excusing the landlord from performance of its obligations due to force majeure.

Contrast the provision above with the following force majeure provision found in a landlord-friendly lease:

If either party shall be delayed or hindered in or prevented from the performance of any act required hereunder by Force Majeure, then, except as expressly provided herein to the contrary, performance of such act shall be extended for a period equivalent to the period of such delay. The foregoing shall not apply to either Party's obligations to pay any sums due hereunder to the other Party as required herein.

Several substantive differences exist when comparing this provision with the tenant-oriented provision above. First, the last sentence of the landlord provision requires the tenant to continue payment of rent and any additional sums due, regardless of any delay caused by force majeure. Yet another difference between this provision and the tenant-friendly version is that the landlord provision fails to define “force majeure.” It is therefore unclear whether, inter alia, strikes, lockouts, and other labor disputes are sufficient to extend the period of performance by either party.

A simple comparison of the above referenced provisions demonstrates the substantial differences that can be found in the “boilerplate” force majeure provision. In the tenant-friendly version, force majeure is adequately defined, but does not apply to the performance of landlord's obligations. In contrast, in the landlord-oriented version, force majeure is not clearly defined, but the provision expressly requires the payment of any monetary obligation regardless of the occurrence of any act falling under the force majeure provision. Such a provision obviously has a potentially serious detrimental effect on a tenant. Thus, the differences that may exist in a “standard” force majeure provision are worthy of careful review and negotiation.

Holdover

Yet another provision that often is considered boilerplate, but differs substantially depending on the drafter, is the Holdover provision. Tenants obviously wish to minimize the amount of rent required to be paid during any holdover period and wish to establish at least a month-to-month tenancy. Landlords, on the other hand, will seek to increase as much as possible the rent due during a holdover period, and will also seek to disclaim expressly the creation of a month-to-month tenancy.

For example, the following clause is taken from a tenant-friendly form:

In the event Tenant continues to occupy the Premises after the last day of the Term, as may have been extended, a tenancy from month-to-month only shall be created, and the Rent shall remain the same.

Compare the preceding clause to the following holdover provision from a landlord-oriented lease:

If Tenant continues to occupy the Premises subsequent to any expiration or other termination, whether or not with the consent or acquiescence of Landlord, such shall be deemed to be that of a tenancy-at-will and in no event a month-to-month tenancy or year-to-year tenancy, and it shall be subject to the same terms, covenants, and conditions of this Lease, except that the Rent shall be three times the amount payable in the last year of the immediately preceding Term. No extension or renewal of this Lease shall be deemed to have occurred by such holding over.

Thus, substantial differences can exist in holdover provisions, and the substantive nature of such differences should demonstrate the necessity of negotiating this so-called standard provision.

Notice

Another provision that should be carefully drafted and reviewed is the Notice provision. The way in which the notice provision is drafted potentially determines substantive issues ranging from whether an event of default has occurred to determining whether a tenant has timely exercised an option to extend the term of the lease. It is of the utmost importance, therefore, that the notice provision be drafted and reviewed carefully. The primary issues regarding the notice provision involve delineating the ways in which proper notice may be given, and also determining when such notice shall be deemed received. The following notice provision is relatively standard, but precludes the tenant from any other method of service that might otherwise be allowed:

Wherever in this Lease it shall be required that any notice, request, report, communication, or demand be given, served or transmitted by either party to this Lease to or on the other, such notice or demand shall be in writing and shall be personally delivered or forwarded by certified mail, return receipt requested, or by nationally recognized courier service providing written confirmation of delivery, to the addresses of the parties specified herein. Notice shall be deemed to have been given or served on the delivery date indicated by the United States Postal Service or courier service on the return receipt or on the date such delivery is refused or marked “undeliverable,” unless Tenant is served personally, in which event the date of personal delivery shall be deemed the effective date of notice. The foregoing method of service shall be exclusive, and Tenant waives, to the fullest extent permitted under law, the right to any other method of service required by any statute or law now or hereafter in force. Whenever multiple notices are sent or multiple methods of transmitting any notice are utilized, any time period that commences upon the giving or deemed giving of such notice shall commence upon the earliest date such delivery is effectuated, and such time shall not be extended by operation of law or otherwise because of any later delivery of the same notice.

The above-referenced provision expressly limits the tenant's right to any other method of service provided by law, and also requires that any notice sent be personally delivered or that such notice be tracked by either the United States Post Office or by overnight carrier in order to determine when such notice is deemed received. Other standard notice provisions affix a certain number of days after the mailing of a notice as the time at which such notice is deemed received. Additionally, when drafting or reviewing a notice provision, it is important to decide whether notice by fax or by e-mail will be allowed. Each of these issues may be dealt with in different ways, and the notice provision should be read accordingly.

The force majeure, holdover, and notice provisions discussed above are merely a small sample of Miscellaneous provisions included in almost all commercial leases, regardless of whether the lease is drafted by a representative of the landlord or the tenant. The discussion of such provisions is not intended as an extensive analysis, but rather is intended to demonstrate the numerous differences that can be found in such “standardized” Miscellaneous provisions.

Other 'Miscellaneous' Provisions

In addition to the Miscellaneous provisions found in almost all commercial leases, several miscellaneous, boilerplate provisions will either be included or excluded in a lease based on whether the lease is drafted on behalf of the landlord or on behalf of the tenant. For example, a tenant is likely to include a “Consents” provision as miscellaneous language. Such a provision is an attempt to impose a reasonableness standard on all consents required under the lease, and is often written as simply as: “Wherever in this Lease consent of a party is required for an act by or for the other party, such consent shall not be unreasonably withheld, conditioned, or delayed.” This subtle provision may catch some landlords off-guard, and may result in the unintended consequence of requiring a landlord to act reasonably and timely when giving its consent to a request such as an assignment or sublease. Therefore, it is imperative that a landlord's representative carefully review the Miscellaneous section of a lease, especially provisions included solely for the benefit of the tenant.

An additional provision that tenants often include is that of the Covenant of Quiet Enjoyment. Although many states now imply a covenant of quiet enjoyment, some do not, and therefore most tenants expressly include such a provision in a lease. Although most covenants of quiet enjoyment are standard, some tenants attempt to use the covenant of quiet enjoyment to require that the landlord provide a copy of owner's title insurance to enumerate any encumbrances on the premises. For example, the following provision is taken from a tenant-oriented form:

Landlord represents and warrants that Landlord is seized in fee simple title to the Premises, free and clear of all encumbrances or restrictions other than the encumbrances and restrictions found on the policy of owner's title insurance attached hereto as Exhibit ___, and such policy is true, correct, and complete, has not been amended, and pertains to the entire Premises. Provided that there shall be no Default by the Tenant hereunder as to which all times to cure shall have expired, then, subject to the terms of this Lease, Landlord warrants that the Tenant shall peaceably and quietly enjoy the Premises and appurtenances thereto without hindrance or molestation by anyone.

Additionally, if the lease is drafted on behalf of the landlord, the tenant's representative must ensure that a version of the covenant of quiet enjoyment provision is included.

A landlord's representative may draft a lease to include several substantive provisions under the guise of the Miscellaneous section. For example, a landlord may attempt to substantially limit its liability by limiting the definition of “Landlord” and by expressly limiting its liability to its equity in the Premises. One particularly landlord-friendly form includes the following provisions under “Miscellaneous”:

Landlord shall mean only the owner or mortgagee in possession for the time being of the building in which the Premises is located or the Shopping Center or the owner of a leasehold interest in said building or the Shopping Center and/or the land thereunder (or the managing agent of any such owner or mortgagee) so that in the event of sale of said building or the Shopping Center or leasehold interest or an assignment of this Lease, or a demise of said building or the Shopping Center and/or land, Landlord shall be entirely freed and relieved of all obligations of Landlord subsequently accruing.

In the event Tenant makes any claim or asserts any cause of action against Landlord as a result of Landlord's default: (a) Tenant's sole and exclusive remedy shall be against the current rents, issues, profits, and other income Landlord receives from its operation of the Project, net of all current operating expenses, liabilities, reserves, and debt service associated with said operation, and if such net income is insufficient to satisfy said judgment, then said judgment shall be satisfied out of Landlord's equity in the Project, (b) no other real, personal, or mixed property of Landlord, wherever located, shall be subject to levy on any judgment obtained against Landlord, (c) if such net income and equity is insufficient to satisfy any judgment, Tenant will not institute any further action, suit, claim, or demand, in law or in equity, against Landlord for or on the account of such deficiency, and (d) Landlord's default shall not constitute consent by Landlord for Tenant to perform or observe such terms, covenants, or conditions at Landlord's expense.

The provision referenced above is particularly onerous for a tenant, but without careful review of the Miscellaneous section, a tenant's representative might overlook such a substantive clause and may inadvertently limit the tenant's rights and remedies.

Additionally, a “Non-Waiver” clause often is included under the Miscellaneous section of a landlord-oriented form, whereas a lease drafted on behalf of a tenant will seek to omit this provision entirely. Some landlord-drafted clauses go further than others by seeking to limit a tenant's reliance on the landlord's course of dealing when claiming that the landlord has waived a particular default. For example, the following provision is taken from a landlord-friendly form:

The rights and remedies granted herein or by law or equity are separate and no one of them, whether or not exercised, shall be deemed to exclude other rights or remedies. No failure of a party to exercise, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of any right or remedy granted hereunder. Receipt by Landlord of any Rent or other amount due hereunder with knowledge of the breach by the Tenant of any provision hereof shall not constitute a waiver of such breach or an accord and satisfaction. To be valid, any waiver shall be in writing and signed by the party waiving its rights, and no breach shall be deemed to be a waiver of any subsequent breach.

This provision substantially limits a tenant's ability to rely on course of dealing between the tenant and the landlord when arguing whether a default has occurred. For example, if the landlord had been accepting rent 10 days late for the last 5 months, this provision would allow the landlord to claim a tenant default in the next month if the tenant attempted to pay 10 days late again. The consequences of such a Miscellaneous clause could, therefore, be substantial for a tenant, and the tenant is responsible for carefully reviewing such a clause, regardless of whether it is found in the Miscellaneous section of the lease.

Conclusion

The provisions referenced above are not the only boilerplate provisions that can be altered to benefit either the landlord or the tenant, and the discussion above is not intended to be an exhaustive overview of every Miscellaneous boilerplate lease provision. Rather, the article's purpose is to call attention to the potential differences found in so-called standardized language. It is the responsibility of each drafter or reviewer to recognize that such provisions can differ significantly, and to draft carefully or revise such provisions to ensure that his or her client is protected as much as possible from potentially substantial issues.

After extensively reviewing or drafting the “substantive” provisions of a lease, it is tempting to overlook the so-called “boilerplate” provisions usually found at the end of the lease. These provisions typically are placed innocuously in the “Miscellaneous” section of a lease, thereby furthering the impression that such provisions are standardized and of little importance. Such boilerplate provisions are not nearly as uniform and standard as one might think, however, and numerous differences can be found in Miscellaneous provisions depending on whether the lease is drafted on behalf of the landlord or the tenant. It is imperative, therefore, that the boilerplate provisions of a lease are carefully reviewed by both parties to ensure that such provisions accurately and completely set forth each party's understanding of the lease terms.

This article provides a brief overview of several boilerplate provisions almost always found in a lease, regardless of whether the drafter represents the landlord or the tenant. The article enumerates several of the substantive differences that can be found in such provisions, and demonstrates the necessity of carefully reviewing such provisions. It then references several provisions that a tenant-oriented form likely would include under the Miscellaneous section, and also references several provisions likely to be included in the Miscellaneous section of a landlord-oriented form. Despite the inclination to gloss over boilerplate language, it is clear that failing to adequately review such language could lead to unintended consequences.

Several provisions are almost always included in the Miscellaneous section of a commercial lease, but such provisions are not nearly as standardized as one might believe.

Force Majeure

For example, numerous variations of the Force Majeure provision exist. The following is one example of a force majeure provision taken from a tenant-friendly lease:

If Tenant is delayed or prevented from performing any of its obligations under this Lease by reason of strike, lockouts, labor troubles, failure of power, riots, insurrection, war, acts of God, or any other cause beyond Tenant's control, the period of such delay or such prevention shall be deemed added to the time period herein provided for the performance of any such obligation by Tenant.

Note that this provision refers only to situations in which the tenant is excused from performance of its obligations. No mention is made of excusing the landlord from performance of its obligations due to force majeure.

Contrast the provision above with the following force majeure provision found in a landlord-friendly lease:

If either party shall be delayed or hindered in or prevented from the performance of any act required hereunder by Force Majeure, then, except as expressly provided herein to the contrary, performance of such act shall be extended for a period equivalent to the period of such delay. The foregoing shall not apply to either Party's obligations to pay any sums due hereunder to the other Party as required herein.

Several substantive differences exist when comparing this provision with the tenant-oriented provision above. First, the last sentence of the landlord provision requires the tenant to continue payment of rent and any additional sums due, regardless of any delay caused by force majeure. Yet another difference between this provision and the tenant-friendly version is that the landlord provision fails to define “force majeure.” It is therefore unclear whether, inter alia, strikes, lockouts, and other labor disputes are sufficient to extend the period of performance by either party.

A simple comparison of the above referenced provisions demonstrates the substantial differences that can be found in the “boilerplate” force majeure provision. In the tenant-friendly version, force majeure is adequately defined, but does not apply to the performance of landlord's obligations. In contrast, in the landlord-oriented version, force majeure is not clearly defined, but the provision expressly requires the payment of any monetary obligation regardless of the occurrence of any act falling under the force majeure provision. Such a provision obviously has a potentially serious detrimental effect on a tenant. Thus, the differences that may exist in a “standard” force majeure provision are worthy of careful review and negotiation.

Holdover

Yet another provision that often is considered boilerplate, but differs substantially depending on the drafter, is the Holdover provision. Tenants obviously wish to minimize the amount of rent required to be paid during any holdover period and wish to establish at least a month-to-month tenancy. Landlords, on the other hand, will seek to increase as much as possible the rent due during a holdover period, and will also seek to disclaim expressly the creation of a month-to-month tenancy.

For example, the following clause is taken from a tenant-friendly form:

In the event Tenant continues to occupy the Premises after the last day of the Term, as may have been extended, a tenancy from month-to-month only shall be created, and the Rent shall remain the same.

Compare the preceding clause to the following holdover provision from a landlord-oriented lease:

If Tenant continues to occupy the Premises subsequent to any expiration or other termination, whether or not with the consent or acquiescence of Landlord, such shall be deemed to be that of a tenancy-at-will and in no event a month-to-month tenancy or year-to-year tenancy, and it shall be subject to the same terms, covenants, and conditions of this Lease, except that the Rent shall be three times the amount payable in the last year of the immediately preceding Term. No extension or renewal of this Lease shall be deemed to have occurred by such holding over.

Thus, substantial differences can exist in holdover provisions, and the substantive nature of such differences should demonstrate the necessity of negotiating this so-called standard provision.

Notice

Another provision that should be carefully drafted and reviewed is the Notice provision. The way in which the notice provision is drafted potentially determines substantive issues ranging from whether an event of default has occurred to determining whether a tenant has timely exercised an option to extend the term of the lease. It is of the utmost importance, therefore, that the notice provision be drafted and reviewed carefully. The primary issues regarding the notice provision involve delineating the ways in which proper notice may be given, and also determining when such notice shall be deemed received. The following notice provision is relatively standard, but precludes the tenant from any other method of service that might otherwise be allowed:

Wherever in this Lease it shall be required that any notice, request, report, communication, or demand be given, served or transmitted by either party to this Lease to or on the other, such notice or demand shall be in writing and shall be personally delivered or forwarded by certified mail, return receipt requested, or by nationally recognized courier service providing written confirmation of delivery, to the addresses of the parties specified herein. Notice shall be deemed to have been given or served on the delivery date indicated by the United States Postal Service or courier service on the return receipt or on the date such delivery is refused or marked “undeliverable,” unless Tenant is served personally, in which event the date of personal delivery shall be deemed the effective date of notice. The foregoing method of service shall be exclusive, and Tenant waives, to the fullest extent permitted under law, the right to any other method of service required by any statute or law now or hereafter in force. Whenever multiple notices are sent or multiple methods of transmitting any notice are utilized, any time period that commences upon the giving or deemed giving of such notice shall commence upon the earliest date such delivery is effectuated, and such time shall not be extended by operation of law or otherwise because of any later delivery of the same notice.

The above-referenced provision expressly limits the tenant's right to any other method of service provided by law, and also requires that any notice sent be personally delivered or that such notice be tracked by either the United States Post Office or by overnight carrier in order to determine when such notice is deemed received. Other standard notice provisions affix a certain number of days after the mailing of a notice as the time at which such notice is deemed received. Additionally, when drafting or reviewing a notice provision, it is important to decide whether notice by fax or by e-mail will be allowed. Each of these issues may be dealt with in different ways, and the notice provision should be read accordingly.

The force majeure, holdover, and notice provisions discussed above are merely a small sample of Miscellaneous provisions included in almost all commercial leases, regardless of whether the lease is drafted by a representative of the landlord or the tenant. The discussion of such provisions is not intended as an extensive analysis, but rather is intended to demonstrate the numerous differences that can be found in such “standardized” Miscellaneous provisions.

Other 'Miscellaneous' Provisions

In addition to the Miscellaneous provisions found in almost all commercial leases, several miscellaneous, boilerplate provisions will either be included or excluded in a lease based on whether the lease is drafted on behalf of the landlord or on behalf of the tenant. For example, a tenant is likely to include a “Consents” provision as miscellaneous language. Such a provision is an attempt to impose a reasonableness standard on all consents required under the lease, and is often written as simply as: “Wherever in this Lease consent of a party is required for an act by or for the other party, such consent shall not be unreasonably withheld, conditioned, or delayed.” This subtle provision may catch some landlords off-guard, and may result in the unintended consequence of requiring a landlord to act reasonably and timely when giving its consent to a request such as an assignment or sublease. Therefore, it is imperative that a landlord's representative carefully review the Miscellaneous section of a lease, especially provisions included solely for the benefit of the tenant.

An additional provision that tenants often include is that of the Covenant of Quiet Enjoyment. Although many states now imply a covenant of quiet enjoyment, some do not, and therefore most tenants expressly include such a provision in a lease. Although most covenants of quiet enjoyment are standard, some tenants attempt to use the covenant of quiet enjoyment to require that the landlord provide a copy of owner's title insurance to enumerate any encumbrances on the premises. For example, the following provision is taken from a tenant-oriented form:

Landlord represents and warrants that Landlord is seized in fee simple title to the Premises, free and clear of all encumbrances or restrictions other than the encumbrances and restrictions found on the policy of owner's title insurance attached hereto as Exhibit ___, and such policy is true, correct, and complete, has not been amended, and pertains to the entire Premises. Provided that there shall be no Default by the Tenant hereunder as to which all times to cure shall have expired, then, subject to the terms of this Lease, Landlord warrants that the Tenant shall peaceably and quietly enjoy the Premises and appurtenances thereto without hindrance or molestation by anyone.

Additionally, if the lease is drafted on behalf of the landlord, the tenant's representative must ensure that a version of the covenant of quiet enjoyment provision is included.

A landlord's representative may draft a lease to include several substantive provisions under the guise of the Miscellaneous section. For example, a landlord may attempt to substantially limit its liability by limiting the definition of “Landlord” and by expressly limiting its liability to its equity in the Premises. One particularly landlord-friendly form includes the following provisions under “Miscellaneous”:

Landlord shall mean only the owner or mortgagee in possession for the time being of the building in which the Premises is located or the Shopping Center or the owner of a leasehold interest in said building or the Shopping Center and/or the land thereunder (or the managing agent of any such owner or mortgagee) so that in the event of sale of said building or the Shopping Center or leasehold interest or an assignment of this Lease, or a demise of said building or the Shopping Center and/or land, Landlord shall be entirely freed and relieved of all obligations of Landlord subsequently accruing.

In the event Tenant makes any claim or asserts any cause of action against Landlord as a result of Landlord's default: (a) Tenant's sole and exclusive remedy shall be against the current rents, issues, profits, and other income Landlord receives from its operation of the Project, net of all current operating expenses, liabilities, reserves, and debt service associated with said operation, and if such net income is insufficient to satisfy said judgment, then said judgment shall be satisfied out of Landlord's equity in the Project, (b) no other real, personal, or mixed property of Landlord, wherever located, shall be subject to levy on any judgment obtained against Landlord, (c) if such net income and equity is insufficient to satisfy any judgment, Tenant will not institute any further action, suit, claim, or demand, in law or in equity, against Landlord for or on the account of such deficiency, and (d) Landlord's default shall not constitute consent by Landlord for Tenant to perform or observe such terms, covenants, or conditions at Landlord's expense.

The provision referenced above is particularly onerous for a tenant, but without careful review of the Miscellaneous section, a tenant's representative might overlook such a substantive clause and may inadvertently limit the tenant's rights and remedies.

Additionally, a “Non-Waiver” clause often is included under the Miscellaneous section of a landlord-oriented form, whereas a lease drafted on behalf of a tenant will seek to omit this provision entirely. Some landlord-drafted clauses go further than others by seeking to limit a tenant's reliance on the landlord's course of dealing when claiming that the landlord has waived a particular default. For example, the following provision is taken from a landlord-friendly form:

The rights and remedies granted herein or by law or equity are separate and no one of them, whether or not exercised, shall be deemed to exclude other rights or remedies. No failure of a party to exercise, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of any right or remedy granted hereunder. Receipt by Landlord of any Rent or other amount due hereunder with knowledge of the breach by the Tenant of any provision hereof shall not constitute a waiver of such breach or an accord and satisfaction. To be valid, any waiver shall be in writing and signed by the party waiving its rights, and no breach shall be deemed to be a waiver of any subsequent breach.

This provision substantially limits a tenant's ability to rely on course of dealing between the tenant and the landlord when arguing whether a default has occurred. For example, if the landlord had been accepting rent 10 days late for the last 5 months, this provision would allow the landlord to claim a tenant default in the next month if the tenant attempted to pay 10 days late again. The consequences of such a Miscellaneous clause could, therefore, be substantial for a tenant, and the tenant is responsible for carefully reviewing such a clause, regardless of whether it is found in the Miscellaneous section of the lease.

Conclusion

The provisions referenced above are not the only boilerplate provisions that can be altered to benefit either the landlord or the tenant, and the discussion above is not intended to be an exhaustive overview of every Miscellaneous boilerplate lease provision. Rather, the article's purpose is to call attention to the potential differences found in so-called standardized language. It is the responsibility of each drafter or reviewer to recognize that such provisions can differ significantly, and to draft carefully or revise such provisions to ensure that his or her client is protected as much as possible from potentially substantial issues.