Commercial Lease Basics

If you own a brick and mortar business it is important to understand commercial leasing law, we want to help with the basics.

District of Columbia law sets default rights and obligations for anyone leasing an apartment, commercial building, or any other rental property. However, a tenant of the commercial property does not enjoy the same rights as a tenant of the residential property. For example, something called the implied warranty of habitability only applies to residential properties. The implied warranty of habitability is an automatic warranty that a residential property is fit for human habitation and that the premises will remain fit and habitable throughout the duration of the lease. Commercial leases have no such warranty unless one is written into a lease. Further, the commercial landlord, unlike the residential landlord, has no duty to re-leasing a property after the tenant leaves early, provided the lease has no contradictory contractual provision.

District law does protect both residential tenants and commercial tenants who are constructively evicted. A constructive eviction exists when the tenant leaves a property because the landlord fails to keep the property fit for occupancy, e.g. the landlord refuses to provide heat or water to the apartment. The constructive eviction could be a defense for not paying the rent that is due after the constructive eviction, and it also serves as an independent legal basis for the tenant to ask for monetary damages. The difference between the constructive eviction and implied warranty of habitability is that the constructive eviction requires actually leaving the premises and more egregious actions on the part of the landlord.

It is important to note that a tenant can negotiate and change the default rule set by District law to protect its interests. First, the lease could provide the tenant with the right to withhold or lower rent payments when the landlord fails to perform some duty under the lease, such as the failure to prevent mold. When the tenant withholds the rent payment, the tenant is usually required to give written notice to the landlord explaining the reason. Second, the commercial tenant could contract to have the right to perform the landlord’s obligations when the landlord fails to perform it and withhold the cost for doing so from the rent. For example, when the landlord fails to repair the property as required by the lease, the tenant has right to hire somebody to repair it and charges the landlord for the expense. Third, the ultimate tenant remedy is the right to terminate the lease. A lease can be drafted so that the tenant could terminate the lease for something less serious than constructive eviction requires. All in all, the commercial tenant should carefully negotiate the lease with the landlord and put the provisions into the contract.

Haolan Li