What factors determine the binding nature of a letter of intent? Is there an implied duty of good faith even if the letter of intent is non-binding?
Letters of intent (LOIs) are commonly used in commercial real estate negotiations to outline the terms and conditions of a proposed transaction. In Florida, the binding nature of an LOI is governed by contract law, and it is important for parties to understand the factors that may determine the binding nature of an LOI and the potential implications of such binding. Additionally, parties should be aware of any implied duties of good faith and fair dealing that may apply to the performance of express terms in a contract.
One reason why it may be useful to use a letter of intent (LOI) in a commercial real estate transaction is that it allows the parties to outline the key terms and conditions of the proposed deal before committing to a full and legally binding contract. This can be especially useful in complex transactions where there are many details to be negotiated and it may be helpful to have a clear and concise summary of the agreed-upon terms to reference as the negotiations progress.
For example, let’s say that a landlord and tenant are negotiating a lease for a large commercial property. The parties may use an LOI to outline the term of the lease, the rent amount, the tenant’s rights and responsibilities, and any other key terms of the deal. This LOI can serve as a guide for the parties as they continue to negotiate the more detailed provisions of the final lease agreement. If any disputes or misunderstandings arise during the negotiation process, the parties can refer back to the LOI to clarify their initial intentions and agreements.
In addition to providing a summary of the key terms, an LOI can also serve as a good faith gesture and demonstrate the parties’ commitment to moving forward with the transaction. This can be especially important in competitive situations where multiple parties may be interested in the same property. By executing an LOI, the parties can signal their willingness to enter into a formal contract and begin the due diligence process.
Overall, an LOI can be a useful tool in a commercial real estate transaction by providing a clear and concise summary of the key terms, serving as a guide for negotiations, and demonstrating the parties’ commitment to moving forward with the deal.
Under Florida contract law, “agreements to agree,” in which one or both parties do not intend to enter into a binding contract and the terms of the agreement remain open and subject to negotiation, are unenforceable (ABC Liquors, Inc. v. Centimark Corp., 967 So.2d 1053, 1056 (Fla. 5th DCA 2007)).
To determine whether an LOI is binding, Florida courts consider the language in the letter, the surrounding circumstances, and various factors such as the type of contract, the number of terms agreed upon in relation to all terms to be included, the number of details still to be resolved, the parties’ relationship, and the formality of the letter’s creation (Midtown Realty, Inc. v. Hussain, 712 So. 2d 1249, 1252 (Fla. 3d DCA 1998)).
A court may find a binding agreement based on these factors even if the parties have not included language expressly disclaiming an intent to be bound (King v. Bray, 867 So. 2d 1224, 1228 (Fla. 5th DCA 2004); Citizens Bank of Perry v. Harlie Lynch Constr. Co., 426 So. 2d 52, 54 (Fla. 1st DCA 1983)).
While the duty of good faith and fair dealing is implied in every contract under Florida law, the duty only applies to the performance of express terms in a contract and would not apply to an LOI found to be non-binding (see White Constr. Co., 633 F.Supp.2d at 1328-29; Maxwell v. First United Bank, 782 So. 2d 931, 934-35 (Fla. 4th DCA 2001)).
If a lease term expires on a Sunday, can the tenant surrender the premises on the following business day without incurring a default, or is there a risk that the landlord will allege default?
Did you know that in Florida, there’s no special provision in the law that gives tenants a break just because their lease happens to expire on a Sunday? That means if you’re a tenant and your lease is up on a Sunday, you better have everything packed and ready to go by the stroke of midnight on Sunday night. Otherwise, you might find yourself in hot water with your landlord, who could potentially claim a default if you try to surrender the premises on the following Monday. Unless, of course, the lease specifically states otherwise.
But let’s be honest here, who actually takes the time to think about their lease falling on a Sunday when you are dealing with a potentially multi-year commercial lease? I know that I have not in prior deals when I was a younger lawyer. When your lease expires, make sure you’re out of there by Sunday at midnight, and you should be good to go. If you are not, you could risk being in default and the landlord charging additional fees and damages.
When a tenant extends its term, are the tenant’s options (such as a termination or renewal option) automatically included in the extension term?
In our beautiful sunshine state, the language of a lease and any instruments extending its term are crucial in determining whether a tenant retains the option to renew or terminate the lease during an extension period. If the lease and the amendment extending the term does not address this specific issue, the amendment is essentially an extension of the original lease, and all original terms, including any renewal or termination options, remain in effect. This was made clear in the case of Woodard Tire Co. v. Hartley Realty, Inc., 596 So. 2d 1114, 1116 (Fla. 3d DCA 1992), in which the court held that an amendment instrument should specifically address whether or not renewal or termination rights continue.
Therefore, it is important for both landlords and tenants to carefully review and consider the language of their lease and any amendments to ensure their rights and obligations are clearly defined. If a lease is silent on renewal, and the landlord accepts future rent payments, then the lease would likely be presumed to continue on the original term’s payment schedule. For example, if your commercial lease was paying monthly, then the lease would be proceed to continue on a month-to-month basis.
Can a tenant withhold rent if the landlord breaches a covenant in the lease?
Florida common law does not allow tenants to withhold rent due to a landlord’s breach of a covenant unless the lease specifically allows it or the breach amounts to a constructive eviction. Statutory law allows tenants to stop paying rent if the lease requires the landlord to repair the property and the landlord’s failure to do so makes the property uninhabitable. In this case, the tenant must notify the landlord in writing and allow them 20 days to fix the issue. If the landlord does not repair the property within this time, the tenant may then stop paying rent, terminate the lease, and vacate the property, keeping the withheld rent.
However, this statute only applies if the property is completely uninhabitable and does not cover typical repairs. Both statutory and common law in Florida require the landlord to be given an opportunity to fix the issue before the tenant can withhold rent or terminate the lease.
In Florida, can a tenant abate rent if the premises have no (or inadequate) heat or air-conditioning, or if there is a hazardous substance such as asbestos or mold present? Can rent be abated if the windows are blocked or covered?
If a a tenant’s living conditions are inadequate or the premises are uninhabitable due to a lack of heating or air conditioning; the tenant may be able to stop paying rent, following the provisions and notice requirements of Florida Statute § 83.201. Similarly, if the presence of a hazardous substance in the premises makes the property completely uninhabitable, the tenant may be able to stop paying rent, as it could be considered a constructive eviction under § 83.201. It is uncertain if a tenant can stop paying rent due to blocked windows in Florida, as it would depend on whether the obstruction makes the premises uninhabitable under § 83.201.
If a guaranty does not require a guarantor’s consent for a lease amendment, can the guarantor still be held liable for the amended lease?
In Florida, if a guaranty does not specifically require the guarantor’s consent to a lease amendment, the guarantor is only held responsible for the amended lease if the guaranty is ongoing. A continuing guaranty is a guarantee that covers an indefinite period of time or a series of transactions or credits. To be considered continuing, a guaranty must explicitly state that it covers future transactions.
In general, a guaranty must expressly state an intention to cover future transactions to be considered continuing. (Zero Food Storage, Inc. v. Udell, 163 So. 2d 303, 304-05 (Fla. 3d DCA 1964); Fidelity Nat’l Bank of S. Miami v. Melo, 366 So. 2d 1218, 1221 (Fla. 3d DCA 1979); Sheth v. C.C. Altamonte J.V., 976 So. 2d 85, 87-88 (Fla. 5th DCA 2008)).
If a lease is assigned, is the guarantor automatically released from their obligations under the lease, or is an express release required?
Under Florida law, there are two types of guaranties: general and special. A special guaranty is made in favor of a particular party and cannot be assigned without the guarantor’s consent. A general guaranty, on the other hand, applies to the original guaranteed party’s successors and assigns, and can be transferred to any party who has the right to the underlying rights or obligations. A general guaranty is enforceable if it indicates that the guarantor intended for people other than the party addressed in the guaranty to rely on it. (New Holland v. Trunk, 579 So. 2d 215, 217 (Fla. 5th DCA 1991)).
However, an assignment that changes the guarantor’s material obligations to their detriment may release the guarantor from the terms of the general guaranty. (Rizzi v. Serv. Dev. Corp., 354 So. 2d 898, 899-900 (Fla. 4th DCA 1978)).
Is there a standard procedure for measuring the tenant’s premises and the building in which they are located?
There is no specific standard procedure for measuring the tenant’s premises and the building in which they are located in Florida. However, it is generally accepted that the size of the tenant’s premises should be accurately stated in the lease agreement. It is also common for the landlord to provide a floor plan or diagram of the premises to the tenant. The tenant may also wish to physically measure the premises to ensure that the size stated in the lease agreement is accurate.
If the size of the premises is not accurately stated in the lease agreement and the tenant believes that the error is material, the tenant may have grounds to seek a reduction in rent or other remedies.
It is also important for the tenant to be aware of any common areas or amenities that are included as part of the premises, as these may affect the tenant’s use and enjoyment of the space.
Notwithstanding the forgoing, it is extremely important for any commercial lease to set forth how the tenant’s square footage will be measured in order to calculate the tenant’s liabilities under the lease, such as their share of operating expenses and common area maintenance. This issue was addressed in the case of Ocwen Fed. Bank FSB v. LVWD, Ltd., 766 So. 2d 248, 249-50 (Fla. 4th DCA 2000).
As a general matter of law, any tenant’s allocated liability (based on square footage) should not be significantly disproportionate to the actual amount of space the tenant occupies in relation to the entire property.
This was noted pursuant to Brandt v. Dade Dental Ctr. Inc., 680 So. 2d 1063, 1063-64 (Fla. 3d DCA 1996).
In Florida, can a landlord access the tenant’s premises without prior consent, and can the tenant refuse to allow such access?
Unlike the residential statutes, the commercial section of the Florida Statutes does not address a commercial landlord’s right to access leased premises. Under Florida common law, if the lease is silent on this issue, the tenant has a fee interest in the premises during the term of the lease and the landlord does not have the right of access. The tenant does have a legal duty to prevent waste and maintain the premises, as established in Stephenson v. Nat’l Bank of Winter Haven, 109 So. 424, 426 (Fla. 1926).
In cases of evidence of waste or exigent circumstances, a Florida court may allow the landlord to access the premises in order to prevent imminent harm to the property. If the lease does not address the issue, a tenant may deny the landlord access to the premises. It is recommended that provisions addressing a right of access be included in a commercial lease.
Can a tenant obligate the landlord to make repairs or improvements to the premises if the lease is silent on the matter? Can the tenant demand reimbursement from the landlord for repairs or improvements paid for by the tenant?
In Florida, if the lease is silent on the matter, the tenant cannot obligate the landlord to make repairs or improvements to the premises. However, the tenant does have a legal duty to maintain the premises and to make necessary repairs, except for those that are the landlord’s responsibility under the lease or by law. If the lease does not specify who is responsible for a particular repair, it will typically be the tenant’s responsibility.
If the tenant pays for repairs or improvements to the premises, they may be able to seek reimbursement from the landlord if the repairs or improvements were necessary due to the landlord’s failure to maintain the premises or if the landlord agreed to pay for them. The tenant should document any repairs or improvements made and any agreements made with the landlord regarding reimbursement. It may also be helpful to consult an attorney or a legal aid organization for assistance in seeking reimbursement.
If the premises are damaged by fire or flooding and the lease is silent on the matter, what rights does the tenant have (including the ability to terminate the lease, abate rent, or require the landlord to restore the premises)?
In Florida, if the premises are damaged by fire or flooding and the lease is silent on the matter, the tenant’s rights will depend on the extent of the damage and whether the premises are habitable or uninhabitable.
If the premises are damaged but still habitable, the tenant will generally be required to continue paying rent and may be able to seek a reduction in rent if the damages significantly affect the tenant’s use and enjoyment of the premises. The tenant may also be able to seek reimbursement from the landlord if the damages were the result of the landlord’s negligence or failure to maintain the premises.
If the premises are significantly damaged and become uninhabitable, the tenant may be able to terminate the lease and vacate the premises. The tenant may also be entitled to abate rent until the premises are repaired or restored to a habitable condition. The tenant may also be able to seek reimbursement from the landlord for any damages paid for by the tenant.
It is advisable for the tenant to carefully review the terms of the lease agreement and any applicable laws in order to understand their rights and responsibilities in the event of damages to the premises. The tenant may also wish to consult an attorney or a legal aid organization for assistance.
Does the landlord have any statutory or common law lien rights on the tenant’s personal property, inventory, and equipment?
In Florida, when a lease requires the landlord to maintain or repair the premises but is silent on the matter of termination, the tenant has the right to terminate the lease under certain conditions if the premises become uninhabitable. The tenant must first serve written notice to the landlord, requesting that the repairs be made. The landlord then has 20 days (or a longer period if agreed upon by both parties) to complete the repairs.
If the repairs are not completed within this time frame, the tenant may terminate the lease, vacate the premises, and avoid any future liability for rent or charges under the lease. The tenant may also seek other remedies available under the lease or by law. (§ 83.201, Fla. Stat.; see Cedar Hills Props. Corp. v. E. Fed. Corp., 575 So. 2d 673 (Fla. 1st DCA 1991) (where the breach of a lease results in lost profits, rent abatement and the amount of rent abated must be supported by evidence)).
If the lease is silent about the landlord’s duty to restore the premises but requires the landlord to maintain and repair the premises, and the premises become uninhabitable, the tenant may also be entitled to withhold rent under certain conditions as specified in § 83.201, Fla. Stat. (see Cedar Hills Props. Corp. v. E. Fed. Corp., 575 So. 2d 673 (Fla. 1st DCA 1991)). In this case, if the landlord fails to complete the repairs, the tenant may terminate the lease, vacate the premises, and avoid any future liability for rent or charges under the lease.
In Florida, landlords do not have any statutory or common law lien rights on a tenant’s personal property, inventory, or equipment. However, a landlord may have a lien on a tenant’s property if the tenant has left behind personal property after vacating the premises and the landlord incurs storage or disposal costs as a result. In this case, the landlord may be able to place a lien on the property to cover these costs. The tenant may be able to avoid a lien by retrieving their property before the landlord incurs any storage or disposal costs.
It is advisable for the tenant to carefully review the terms of the lease agreement and any applicable state laws in order to understand their rights and responsibilities regarding property left behind after vacating the premises.
When the lease is not clear on the ownership of lease improvements, who is generally considered the owner – the tenant or the landlord? Is the landlord required to pay the tenant for improvements paid for by the tenant but deemed as part of the landlord’s realty?
In Florida, if the lease is not clear on the ownership of lease improvements, the general rule is that the tenant is the owner of the improvements. However, there are several factors that may be considered in determining ownership, such as the intent of the parties, the nature of the improvements, and the terms of the lease.
If the landlord is considered the owner of the improvements, they may not be required to pay the tenant for improvements made by the tenant. However, if the tenant is considered the owner of the improvements, the landlord may be required to compensate the tenant for the value of the improvements if the tenant is required to remove them upon the expiration or termination of the lease.
It is advisable for the tenant to carefully review the terms of the lease agreement and any applicable state laws in order to understand their rights and responsibilities regarding lease improvements. The tenant may also wish to consult an attorney or a legal aid organization for assistance in determining ownership and seeking compensation for improvements.
In Florida, do most leases require tenants to comply with all laws in the premises? In the absence of specific language in the lease, which party is responsible for compliance with laws in the premises related to the Americans with Disabilities Act (ADA), local zoning and building codes, and environmental laws?
In Florida, are Subordination, Non-Disturbance, and Attornment Agreements (SNDAs) typically recorded by the parties?
Contract terms are generally binding on the parties without the need for recording. However, when lenders are involved, it is common practice to record subordination, non-disturbance, and attornment agreements (SNDAs). This helps to ensure that the rights and obligations of the parties are clearly established and protected.
If the landlord fails to timely respond to or unreasonably withholds consent for a request to assign the lease or sublet the premises, what rights does the tenant have? Can the original tenant be held liable for the lease as amended if the landlord refuses to release them after an assignment and instead amends and modifies the lease?
Under Florida common law, a landlord may not unreasonably delay or withhold consent to a tenant’s request to assign their lease or sublet their premises, even if the lease does not address the issue of consent. Landlords may not arbitrarily or unfairly refuse consent, and may only do so for commercially reasonable reasons. If a landlord withholds consent for arbitrary or unreasonable reasons, it may be considered a breach of the lease agreement, giving the tenant the right to seek remedies for breach of contract.
However, it is important to note that even after assigning their rights under the lease to another party, the original tenant may remain liable on the underlying lease unless the modification of the underlying lease creates a new lease between the landlord and the assignee. (See Fernandez v. Vazquez, 397 So. 2d 1171, 1174 (Fla. 3d DCA 1981); Popovic v. Fla. Mech. Contractors, Inc., 358 So. 2d 880 (Fla. 2d DCA 1978); Kornblum v. Henry E. Mangels Co., 167 So. 2d 16 (Fla. 3d DCA 1964)).
In Florida, is a landlord required by law to send a default notice, even if the lease does not specify that notice is required? What options does the tenant have to prevent termination in such a situation?
Under Florida law, if a tenant is in monetary default of a lease, the landlord must send a written notice of default demanding either the payment of rent due or the surrender of the premises. This notice must be sent three days before the landlord can seek eviction. If the tenant has committed a non-monetary default under an oral or silent lease, the landlord must give the tenant a written notice of the material breach and an opportunity to cure the default within 15 days.
A tenant can avoid eviction by timely and fully complying with the terms of the lease and curing any alleged defaults.
However, a landlord cannot use self-help eviction procedures, such as changing the locks, to evict a tenant.
Additionally, a tenant may challenge an eviction if it is being sought in retaliation for engaging in protected activities or for discriminatory reasons. Florida courts generally disfavor eviction for minor or technical defaults. (See § 83.20(2) and (3), Fla. Stat.; § 83.67, Fla. Stat.; § 83.682, Fla. Stat.; Smith v. Winn Dixie Stores, Inc., 448 So. 2d 62, 63 (Fla. 3d DCA 1984)).
If a tenant is evicted from their premises, can the landlord continue to collect rent until the end of the lease term?
Under Florida common law, if a tenant breaches, abandons, or renounces a lease before its term expires, the landlord may choose to: (1) terminate the lease and retake possession of the leased premises for its own purposes; (2) retake possession of the leased premises for the tenant’s account and hold the tenant responsible for general damages measured by the difference between the stipulated rent and the amount the landlord can recover in good faith by re-letting the premises; or (3) do nothing and sue the tenant for either the rent due as it matures or all remaining rent due if there is an acceleration clause in the lease.
If the landlord terminates the lease and retakes possession for its own purposes, it cannot seek future rent as that would be a double recovery.
However, if the landlord retakes possession of the leased premises for the tenant, the landlord may continue collecting rent but has a duty to mitigate damages by making a good faith effort to rent the premises at a fair rate. If the landlord chooses not to retake possession, it can continue collecting rent and has no duty to mitigate.
Florida courts will enforce any rent acceleration clause stated in a commercial lease. (See Holiday Furniture Factory Outlet v. State of Fla., Dep’t of Corr., 852 So. 2d 926, 928 (Fla. 1st DCA 2003); Hudson Pest Control, Inc. v. Westford Asset Mgmt., Inc., 622 So. 2d 546, 548-49 (Fla. 5th DCA 1993); Kanter v. Safran, 68 So. 2d 553 (Fla. 1953); Fairway Mortg. Sols. v. Locust Gardens, 988 So. 2d 678, 681 (Fla. 4th DCA 2008); Coast Fed. Sav. & Loan Ass’n v. DeLoach, 362 So. 2d 982 (Fla. 2d DCA 1978)).
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