As we all know, many commercial tenants are having financial difficulties which affect their ability to make their rental payments in a timely manner. To discourage late payments and encourage tenants to perform their financial obligations under their lease, imposing penalties that are more stringent than those that appear in existing leases should be considered as clauses in leases signed with new tenants as well as those added in renewal leases with current tenants.
Some of the following provisions in new or renewal leases, which would become effective after a tenant defaults, may be highly motivating to encourage timely payments from commercial tenants:
If a tenant is late with rent or other financial lease obligations, landlord should require that automatic transfers or debits be used for all future payments based on rules set forth by him or her.
When a tenant fails to make payment in a timely manner more than once, a late fee should be imposed with the amount increasing by a specified percentage for each following violation.
Instead of continuing with rent payments made at the beginning of each month, those tenants not meeting their financial obligations should be required to make quarterly payments in advance on the first day of the first month during the term of the lease.
In the event of tenant default, the landlord should have the ability to increase the amount of the security deposit which should be in the form of a letter of credit which protects the landlord in case the tenant files for bankruptcy.
Rights and options under the lease remain in effect as long as the tenant is not in default. Such rights usually include options to renew or terminate early and the ability to expand or contract the leased premises.