Tenants to a commercial lease should consider drafting a ‘rent catch-up’ clause, in the event that additional rent owed increases by a drastic amount.
The lease of SPoT Concord Place Cafe provided that additional rent was to be invoiced by the landlord in a timely fashion at the end of each year of the lease. Timely invoices allow the company to adjust prices/budget to accommodate any additional rent charges. The landlord failed to do this and invoiced the Cafe for 5 years of additional rent. A settlement was reached, but the cafe was unable to pay the rent in a timely manner after paying the settlement cost. The landlord terminated the lease for breach of the additional rent payment term.
- Before entering into a commercial lease agreement, the tenant should ensure that the possibility of being overburdened with additional rent and monthly rent is minimized by inserting strict language around the amount of additional rent the landlord can charge per calendar year.