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Can Landlords Terminate Leases When Tenants Fail To Comply With The Letter of the Lease?
Posted on Dec. 2, 2012

So the tenant has failed to comply with one of the more “technical” requirements of the lease; can the landlord terminate the lease for breach on a “technicality?”

Traditional property law was one of strict enforcement and sometimes harsh results.  However, modern courts have borrowed from contract law a general policy disfavoring forfeitures, such as termination of leasehold rights.  In Utah, that takes the form of the doctrine of “substantial compliance”—if the tenant substantially complies with the lease terms, the courts will not enforce landlord’s termination rights.

To determine if a tenant has substantially complied with the terms of a lease, the courts will examine such factors as whether the landlord will be deprived of the benefit of the lease, whether the landlord can be adequately compensated for the breach if the lease is not terminated, the extent to which the tenant will suffer from the forfeiture, the willingness of the tenant to cure the breach, and the extent to which the tenant acts in good faith.

Historically, the Utah courts have applied the doctrine of substantial compliance to residential leases, however, the Utah Appellate Court has signaled that the doctrine could also be applied to a commercial lease between sophisticated parties.

The doctrine does not excuse tenants from compliance with lease technicalities, but it may allow a tenant the opportunity to avoid outright termination if the tenant acts in good faith to remedy or offer to remedy such a breach.

 

*This post was written by Attorney James W. Peters

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tomTom Berggren

Tom has an extensive finance and real estate practice representing a wide range of businesses and financial institutions. He specializes in real estate secured loans and often serves as local counsel in multi-state credits. He has the expertise to assist developers, lenders, nonprofits and governmental entities take advantage of New Markets, Historic and Investment tax credits as part of the project financing.

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