In a commercial lease, a Landlord may demand an acceleration clause. An acceleration clause allows a Landlord to demand the full amount of rent and other payments owed under the lease when a Tenant defaults on a lease. For example, if a tenant breaches the lease at the end of the second year of a 10-year lease, the Landlord could demand rent for the remaining 8 years. In this example, if the rent is $5,000.00 per month, the Landlord could demand payment in the amount of $480,000.00 immediately.
Enforceability and Risk Mitigation Strategies
In our experience, a judge will be reluctant to grant a demand under an acceleration clause in the state of Georgia; however, you want to make sure that you are fully aware of this provision. Most landlords will not remove an acceleration clause entirely from a commercial lease.
To protect yourself, you should negotiate leases with shorter initial terms paired with options to renew or extend. For example, entering into a 5-year lease with an option to renew for another 5 years is much safer than entering directly into a 10-year lease.
Protecting Your Commercial Lease
If you need help drafting, negotiating, or reviewing a commercial lease, please contact Kapadia Naik & Farhoudi or call us directly at 770-881-8081.