Important Takeaway About Statutory Default Provisions in Commercial Leases

Statutory Default Nightmare

In the legal field, clarity is crucial. The recent case of T.G. United v. AADD Properties concerned a commercial lease between AADD Properties (Landlord) and T.G. United (Tenant). The landlord terminated the lease and filed suit against the tenant because the tenant had fallen behind on rent payments. The court’s order for the tenant and guarantor to place future rent payments into a trust account was one of the case’s turning points. The landlord then asked for these amounts to be released directly, claiming hardship. However, when the tenant failed to pay the rent due in April 2022, the situation worsened, and the landlord filed for immediate default. The interpretation of the statutory provisions governing default processes was crucial to the dispute.

The tenant asserted that the statutory provision did not apply because the court had not directed payment into the court registry. At the same time, the landlord claimed that the tenant’s breach of the court’s order justified immediate default. The problem became more apparent after the Fifth District Court’s decision.

Paying Court Registry Versus Landlord

The appellate court ruled that a tenant cannot be subject to statutory default provisions until they get a particular order directing them to pay money into the court registry. The court determined that it was unsuitable to provide a statutory fix in this case since this instruction was missing. The court stated that it relied on the plain language of the Landlord Tenant Act and the legislative intent behind it.

Key Takeaway Regarding Statutory Default Provisions

This decision acts as a reminder to attorneys and parties to leasing agreements to carefully review legislative laws and court orders to determine what is expected of them. Please contact us if you have any questions or need assistance with your commercial lease.