Lease Default

What This Liability Means

A lease default occurs when a tenant fails to perform a material lease obligation — most commonly failing to pay rent. After the notice and cure period, the landlord has the right to terminate the lease, pursue eviction, enforce the personal guaranty, and sue for all resulting damages.

Dollar Example: $5,000/month lease with 2 years remaining, default for non-payment

Worst Case Scenario

A lease with acceleration: $120,000 in remaining rent becomes immediately due. Plus restoration, CAM, legal fees, and the personal guaranty enforcement. A manageable monthly payment problem becomes an instant six-figure crisis.

Warning Signs in Your Lease

• Short cure period (3 days) for non-payment with no grace period
• Default triggers acceleration with no additional notice requirement

How to Limit This Liability

• Contact the landlord before missing any payment — proactive workout is always better than formal default
• Understand your notice and cure period — typically 3-10 days for non-payment, 30 days for other defaults

Frequently Asked Questions

What is the difference between a default notice and a termination notice?

A default notice tells you that you've breached the lease and gives you a cure period. A termination notice tells you the lease is terminated. These are sequential — default notice first, then (if uncured) termination notice. Some leases combine them.

What defaults are most commonly triggered?

Non-payment of rent (most common), failure to maintain required insurance, unapproved sublease or assignment, use clause violations, and failure to maintain the premises. Non-payment almost always has the shortest cure period.

Can a landlord terminate the lease for a default I've already fixed?

Not if you cured within the cure period. But some leases have 'repeat default' provisions: if you default on the same obligation 3+ times in 12 months, the landlord can terminate without a cure period after the third occurrence.

What is a workout agreement and how does it prevent formal default?

A workout is a negotiated modification — temporary rent deferral, payment plan, lease restructure — that avoids formal default declaration. Landlords often prefer workout to eviction because eviction takes 3-6 months and costs $10,000-$25,000 in legal fees.

What happens to my credit if a lease defaults?

Commercial lease defaults don't directly affect credit scores like consumer debt does. But judgments for lease obligations can appear on credit reports, and commercial credit reports (Dunn & Bradstreet, Experian Business) track commercial defaults.