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All leases have important dates that the parties to a lease agreement need to agree upon. One of the most significant dates is the date that the lease term will begin, which is often referred to as the “commencement date”. The actual commencement date is one of the most litigated lease provisions. This may seem simple when the commencement date is a specific date. It is not uncommon for either party or both to have satisfy certain conditions in addition to mutual execution, prior to the commencement date. A landlord will look to the tenant to at least deliver a signed lease, proof of insurance, and payment of rent and deposit. A tenant will look to a landlord to confirm that the condition of the premises is in good condition and compliant with applicable laws To ratchet up the uncertainty, in some leases the commencement date is conditioned on the completion of construction by one party or both of improvements or alterations to the premises. As a result of the possibility of disputes of not uncommon for lease agreements to require the tenant to sign a separate document confirming the specific commencement date after it occurs to avoid future dispute.
There are several dates that sometimes are confused with the commencement date that parties need to be cautious keep straight in the lease agreement. Often times the lease will be refer to the date the lease agreement is mutually executed or possibly an effective date. The “effective date” commonly refers to the date the lease agreement is signed by both parties and thereafter the landlord and tenant are bound by the lease agreement. Another date that is sometimes incorporated into a lease agreement is the rent commencement date. The phrase “rent commencement date” means, the date that tenant’s obligation to pay rent starts under the terms of the lease.
In the simplest of lease agreements, the effective date, commencement date, and rent commencement date are all the same date. In most situations, however, there is a difference between these dates. It is imperative that the dates in the lease agreement are clear and consistent. Poorly a drafted lease may result in a landlord with its tenant in possession but not paying rent or, in the alternative, a tenant not in possession with an obligation to pay rent to its landlord.
Instead of using a separate rent commencement date, the obligation to pay rent under some lease agreements starts on the commencement date, however the payment of such rent “abated” meaning the rent payable is reduced or discounted in whole or part. Abated rent is a concession that is sometimes granted in order to allow a tenant a period of time to perform improvements or ramp up operations is sometimes referred to as an "abatement period". (This is different than an abatement resulting from a casualty or eminent domain.) Landlords will often include language which provides that the abated rent granted as a concession may be reinstated in the event of a tenant default.
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Fischer Law Office
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Understanding When the Lease Agreement Starts and Avoiding Litigation.