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Florida Landlord Loses Action Against Guarantor Due to a Failure to Issue a Demand Before Suing

mall entranceIn any contract, including commercial leases and their associated personal guarantees, the choice of language is often extremely important. Sometimes, even seemingly small things make huge differences. That’s why it is so important to make sure that you carefully negotiate each term and then diligently defend the rights and benefits that you negotiated in your agreement. To ensure that you have the resources you need to make this happen, make certain you have experienced Florida commercial litigation attorneys on your side.

One example of a case in which the agreement’s precise wording made all of the difference was a landlord-tenant dispute at one of Orlando’s popular outlet malls. The tenant was a Caribbean restaurant, and the lease agreement called for the restaurant’s founder to sign a personal guaranty. Personal guarantees have become more commonly included terms within commercial leases ever since the economic downturn of the previous decade.

In the restaurant’s case, the guaranty provision in the lease said that, if the tenant defaulted, the guarantor would become responsible for paying the sums that remained due and owing. One key aspect of the case was the choice of wording used in the guaranty clause. The guaranty provision said that the guarantor “shall on demand of Landlord fully and promptly pay all Rental and other sums, costs, and charges to be paid by Tenant, … and in addition shall, on Landlord’s demand, pay to Landlord any and all sums due to Landlord under or pursuant to the terms of the Lease.”

That wording was important because of the actions that the landlord took — and didn’t take — after the tenant defaulted. After a default went uncured by the tenant, the landlord went straight to court and sued the guarantor under the terms of the guaranty clause. Note that the landlord never made a demand of the guarantor before going to court.

That failure to make a demand first proved to be the undoing of the landlord’s case. The guarantor argued, and the appeals court agreed, that the issuance of a demand was a “condition precedent.” In constructing a guaranty clause in a lease agreement, the guaranty can be absolute, or it can be conditional. When a guaranty clause says that payment is “premised on a demand,” that necessarily means that the guaranty is conditional and that the issuance of a demand is something that must be done first before the guarantor is obliged to pay.

The terms of the agreement required the landlord to make the written demand before it made a claim in court for payment. The landlord skipped that step, so it was not yet entitled to recover a judgment under that guaranty.

Commercial lease agreements are often circumstances in which it pays to “sweat the small stuff.” Make sure you have Florida counsel who know how to do exactly that. The diligent South Florida landlord-tenant litigation attorneys at Stok Folk + Kon have been effectively representing both commercial landlords and tenants for many years and can give your case the skilled advocacy you need.

Contact us online or by calling (305) 935-4440 to schedule your consultation and find out how this firm can help you protect your interests.

More blog posts:

Uncertainty Surrounding the Identity of the Correct Landlord Allows St. Petersburg Tenant to Avoid Summary Judgment, Florida Business Lawyers Blog, Sept. 8, 2017

South Florida Commercial Tenant Gets New Crack at Lawsuit Over Denied Parking Spaces, Florida Business Lawyers Blog, May 26, 2017

Photo Credit: Anne B. Hood, [CC0 License], via Wikimedia Commons