default-and-remedies-advisor

Lease Default = Tenant's failure to perform obligations under the lease, triggering landlord's remedies.

Purpose of Analysis:

• Determine if default exists
• Calculate cure periods
• Quantify damages
• Recommend enforcement strategy
• Draft default notices
• Protect landlord's rights

Types of Default

Monetary Default:

• Non-payment of rent
• Non-payment of operating costs
• Non-payment of other charges

Non-Monetary Default:

• Breach of use clause
• Insurance non-compliance
• Unauthorized alterations
• Assignment without consent
• Environmental violations
• Any other covenant breach

Automatic Default (no cure):

• Bankruptcy/insolvency (may be automatic default)
• Abandonment of premises
• Persistent breaches despite multiple cures

Cure Periods

Typical Structure:

• Monetary Default: 5-10 days after notice
• Non-Monetary Default: 15-30 days after notice
• No Cure: Bankruptcy, abandonment (immediate)

Notice Requirement:

• Written notice describing default
• Demand to cure within specified period
• Statement of landlord's intentions if not cured

Landlord Remedies

Termination:

• End lease, regain possession
• Tenant must vacate
• Landlord may re-let premises

Re-Entry:

• Landlord takes possession
• May change locks
• Remove tenant's property (after notice)

Damages:

• Unpaid rent (past and future)
• Acceleration of rent (if lease permits)
• Unamortized TI/leasing costs
• Re-letting costs (commissions, downtime)
• Legal fees
• Interest and penalties

Other Remedies:

• Draw on security deposit
• Call guarantee
• Sue for damages
• Distrain/seize tenant goods (jurisdiction dependent)

Step 1: Identify Default

Questions:

1. What obligation was breached?
2. Is this a monetary or non-monetary default?
3. What does lease define as "default"?
4. Are there any excluded events (force majeure)?

Review lease for specific default definitions

Step 2: Determine Cure Period

Extract from lease:

• Monetary default cure: ___ days
• Non-monetary default cure: ___ days
• Notice requirements
• Waiver provisions (has landlord waived defaults before?)

Calculate deadline:

```

Notice Date + Cure Period = Cure Deadline

```

Step 3: Calculate Damages

Components:

1. Unpaid Rent (past due):

```

Months Overdue × Monthly Rent = Arrears

```

2. Accelerated Rent (future, if lease permits):

```

Remaining Months × Monthly Rent = Future Rent

Discount to NPV if required by jurisdiction

```

3. Unamortized TI/LC:

```

Original TI/LC - (Amortization × Months Elapsed) = Unamortized Balance

```

4. Re-Letting Costs:

```

Downtime (months) × Monthly Rent = Lost Rent

Leasing Commission (new deal) = LC

TI for New Tenant = TI

```

Total Damages = Sum of all components

Step 4: Draft Default Notice

Required Elements:

1. Header: TO: [Tenant Name and Address]
2. Reference: RE: Lease dated [date] for [premises]
3. Default Description: Specific breach identified
4. Demand to Cure: Tenant must cure within [X] days
5. Consequences: If not cured, landlord will [terminate/re-enter/sue]
6. Reservation of Rights: Landlord reserves all rights and remedies
7. Signature: Landlord's authorized representative

Delivery: Registered mail, courier, personal delivery (per lease)

Step 5: Enforcement Strategy

Options:

1. Negotiate Resolution:

• Payment plan for arrears
• Cure non-monetary default
• Amend lease terms

2. Terminate Lease:

• If significant breach or repeat defaults
• Regain possession, re-let space
• Sue for damages

3. Maintain Lease, Sue for Damages:

• Keep tenant in place (if they cure)
• Sue for past damages
• Monitor future compliance

4. Draw Security/Call Guarantee:

• Apply deposit to arrears
• Demand guarantor payment
• Require replenishment of deposit

Unamortized TI Calculation

Formula:

```

Unamortized TI = Original TI - (Original TI ÷ Lease Term × Months Elapsed)

Example:

Original TI: $100,000

Lease Term: 60 months

Months Elapsed: 24 months

Unamortized TI = $100,000 - ($100,000 ÷ 60 × 24) = $100,000 - $40,000 = $60,000

```

Accelerated Rent (NPV)

Formula:

```

Future Rent Stream discounted to present value

Example:

Remaining Term: 36 months

Monthly Rent: $10,000

Discount Rate: 8%/year = 0.67%/month

NPV = Σ [$10,000 ÷ (1.0067)^month] for months 1-36

NPV ≈ $328,000 (vs. $360,000 undiscounted)

```

Total Damages Example

```

Arrears (3 months): $30,000

Accelerated Rent (NPV, 36 months): $328,000

Unamortized TI: $60,000

Unamortized LC: $15,000

Re-letting costs (est.): $40,000

Legal fees: $10,000

--------------------

Total Damages: $483,000

```

Notice Defects

Insufficient Cure Period:

• Notice gives 3 days, lease requires 10 days
• Result: Notice invalid, must re-issue

Vague Default Description:

• "You are in breach of lease"
• Result: Not specific enough, tenant may challenge

Wrong Delivery Method:

• Emailed notice, lease requires registered mail
• Result: Notice may be invalid

Premature Termination

Terminating Before Cure Period Expires:

• Locks changed on day 5 of 10-day cure period
• Result: Wrongful termination, tenant may sue landlord

Waiver of Default:

• Landlord accepted late rent for 12 months without objection
• Result: May have waived strict payment deadline

Damages Miscalculation

Claiming Undiscounted Future Rent:

• Jurisdiction requires NPV discount
• Result: Over-claiming, court reduces award

Double-Recovery:

• Claiming both accelerated rent AND re-letting to new tenant
• Result: Unjust enrichment, must mitigate damages

This skill is automatically loaded when:

• User mentions: default, cure period, default notice, termination, damages, remedies
• Commands invoked: /default-analysis, /notice-generator
• Reading files: Default notices, demand letters

Related Commands:

• /default-analysis - Analyze default, calculate cure periods and damages
• /notice-generator - Draft formal default notices

Example 1: Monetary Default - Rent Arrears

Situation: Tenant has not paid rent for 3 months. Lease requires 10-day cure for monetary default.

Analysis:

```

DEFAULT ANALYSIS

Type: Monetary Default (Non-Payment of Rent)

Default Details:

• Rent Due: $15,000/month
• Months Unpaid: 3 (January, February, March 2025)
• Total Arrears: $45,000
• Late Charges: $1,500 (at 1% per month)
• Total Owing: $46,500

Cure Period: 10 days (per lease Article 15.1)

Action Plan:

1. Draft Notice to Cure
2. Deliver via registered mail + courier
3. Demand payment within 10 days
4. If not cured:

- Terminate lease

- Re-enter premises

- Draw on security deposit ($30,000)

- Sue for balance + damages

Damages if Terminated:

• Arrears: $46,500
• Security deposit applied: -$30,000
• Balance owing: $16,500
• Unamortized TI: $80,000 (24 months remain, $200K original TI, 60-month term)
• Re-letting costs: $35,000 (est. 2 months downtime + $20K commission)
• Legal fees: $8,000 (est.)

TOTAL DAMAGES: $139,500

Recommendation: Issue 10-day notice. If not cured, terminate and sue for damages.

```

Default Notice (Sample):

```

DATE: March 25, 2025

TO: ABC Corp., 123 Industrial Blvd., Unit 5

RE: Lease dated January 1, 2020

NOTICE OF DEFAULT AND DEMAND TO CURE

This letter constitutes formal notice that you are in default of your obligations under the above-referenced Lease.

DEFAULT: You have failed to pay Base Rent for the months of January, February, and March 2025, totaling $45,000, plus late charges of $1,500, for a total of $46,500.

DEMAND TO CURE: You must pay the full amount of $46,500 within TEN (10) DAYS of the date of this notice.

CONSEQUENCES: If you fail to cure this default within the cure period, Landlord will exercise its remedies under the Lease, including but not limited to:

• Terminating the Lease
• Re-entering and taking possession of the Premises
• Suing you for all damages, including arrears, unamortized tenant improvement costs, re-letting costs, and legal fees

RESERVATION OF RIGHTS: This notice does not waive any of Landlord's rights or remedies. Landlord reserves all rights under the Lease and at law.

Deliver payment to: [address]

Sincerely,

[Landlord]

```

Example 2: Non-Monetary Default - Insurance Non-Compliance

Situation: Tenant's insurance expired 60 days ago. Lease requires 30-day cure for non-monetary default.

Analysis:

```

DEFAULT ANALYSIS

Type: Non-Monetary Default (Insurance Non-Compliance)

Default Details:

• Insurance Expiry: January 1, 2025
• Current Date: March 1, 2025
• Days Lapsed: 60 days
• Lease Requirement: Maintain CGL $5M, Property replacement cost
• Current Status: No coverage (lapsed)

Cure Period: 30 days (per lease Article 15.2)

Action Plan:

1. Draft Notice to Cure (30 days)
2. Demand tenant provide updated certificate within 30 days
3. If not cured:

- Landlord obtains insurance policy

- Charge tenant for premiums

- Potential termination if material breach

Landlord's Insurance Cost (if tenant doesn't cure):

• Estimated annual premium: $12,000
• Chargeable to tenant as Additional Rent

Recommendation: Issue 30-day notice. If not cured, obtain insurance and charge tenant.

```

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Skill Version: 1.0

Last Updated: November 13, 2025

Related Skills: commercial-lease-expert, lease-compliance-auditor, indemnity-expert

Related Commands: /default-analysis, /notice-generator