📋 Commercial Lease Breach Overview

Commercial lease breaches in California can arise from various violations by either landlords or tenants. Unlike residential leases, commercial leases in California have fewer statutory protections, making the lease terms themselves critically important. Understanding your rights and the proper procedures for enforcement is essential before sending a demand letter.

Common Types of Commercial Lease Breaches

💰 Rent Default

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Rent default is the most common commercial lease breach. In California, landlords must serve a 3-Day Notice to Pay Rent or Quit before initiating unlawful detainer proceedings. The notice must state the exact amount due and provide a proper method for payment.

Key considerations:

  • Base rent arrears - the principal amount unpaid
  • Late fees - must be specified in the lease and reasonable
  • Interest on unpaid rent - if provided for in the lease
  • Partial payment acceptance - may waive right to evict for that period

🏗 CAM Disputes

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Common Area Maintenance (CAM) charges are a frequent source of commercial lease disputes. Tenants may challenge CAM calculations, excluded expenses, or failure to provide required accountings. Landlords may seek recovery of unpaid CAM charges.

Common CAM issues include:

  • Failure to provide annual CAM reconciliation statements
  • Including capital improvements in operating expenses
  • Improper allocation methodologies (pro-rata share disputes)
  • Administrative fees exceeding lease caps
  • Failure to credit tenant for overpayments

🔧 Maintenance Failures

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Maintenance obligations in commercial leases are typically more negotiable than residential leases. The lease will allocate responsibility for structural repairs, HVAC, roof, plumbing, and other building systems between landlord and tenant.

Types of maintenance breaches:

  • Landlord failure to maintain common areas, structure, or building systems
  • Tenant failure to maintain interior premises or trade fixtures
  • HVAC system failures affecting business operations
  • Roof leaks, plumbing issues, or structural defects
  • Failure to comply with ADA or other code requirements

🚪 Early Termination

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When a tenant abandons a commercial lease before the term expires, the landlord may pursue various remedies. California Civil Code Section 1951.2 governs landlord remedies for tenant abandonment. Landlords have a duty to mitigate damages.

Early termination scenarios:

  • Tenant abandonment before lease expiration
  • Tenant breach leading to landlord termination
  • Constructive eviction claims by tenant
  • Lease buyout or surrender negotiations
  • Assignment or sublease disputes

💡 Commercial vs. Residential Leases

California commercial tenants have far fewer statutory protections than residential tenants. There is no implied warranty of habitability, rent control generally does not apply, and eviction protections are minimal. The lease terms themselves are paramount - carefully review your lease before taking action.

⚠ Statute of Limitations

California has specific time limits for lease-related claims. For more details, see our guide on California Breach of Contract Statute of Limitations.

  • Written lease breach: 4 years (CCP 337)
  • Oral lease breach: 2 years (CCP 339)
  • Property damage: 3 years (CCP 338)

🔍 Evidence Checklist

Gather these documents before sending your demand letter. Thorough documentation strengthens your position whether you are a landlord or tenant.

📄 Lease Documents

  • ✓ Original signed lease agreement
  • ✓ All amendments and addenda
  • ✓ Rent schedule and escalation provisions
  • ✓ CAM provisions and caps
  • ✓ Maintenance responsibility allocation

💰 Payment Records

  • ✓ Rent payment history / ledger
  • ✓ CAM reconciliation statements
  • ✓ Bounced check notices
  • ✓ Late fee calculations
  • ✓ Security deposit documentation

📩 Communications

  • ✓ Prior written notices served
  • ✓ Email correspondence regarding breach
  • ✓ Maintenance/repair requests
  • ✓ Cure demand responses
  • ✓ Proof of service for notices

📷 Property Condition

  • ✓ Move-in condition report and photos
  • ✓ Current condition photos/videos
  • ✓ Maintenance repair invoices
  • ✓ Building inspection reports
  • ✓ Contractor estimates for repairs

📈 Business Impact

  • ✓ Lost revenue documentation
  • ✓ Business interruption records
  • ✓ Relocation cost estimates
  • ✓ Customer loss documentation

📖 Mitigation Evidence

  • ✓ Re-leasing marketing efforts
  • ✓ Showing logs and inquiries
  • ✓ Rejected lease applications
  • ✓ Market rent comparables

🔒 Preserve All Evidence

Once a dispute arises, you have a duty to preserve relevant evidence. Do not delete emails, texts, or other communications. Take photographs of property conditions immediately. Organize your files chronologically to build a clear timeline of events.

💰 Damages & Recovery

California allows landlords and tenants to recover various categories of damages for commercial lease breaches. Understanding the full scope of available damages is essential for valuing your claim.

Landlord's Damages for Tenant Breach

Damage Type Description
Unpaid Rent All rent and additional rent (CAM, taxes, insurance) accrued through termination, plus prejudgment interest at the legal rate (10% per annum under Civil Code 3289).
Future Rent (Lease Balance) Under CCP 1951.2, the present value of rent for the remaining lease term, reduced by rental value or amount landlord proves could reasonably be avoided through re-letting. Landlord must mitigate.
Re-Letting Costs Reasonable costs to prepare the space for a new tenant - repairs beyond normal wear and tear, marketing expenses, broker commissions, tenant improvement allowances.
Property Damage Cost to repair damage to the premises caused by tenant, beyond normal wear and tear. Includes restoration required by lease.
Attorney Fees If the lease includes an attorney fee provision, the prevailing party may recover reasonable attorney fees incurred in enforcing the lease.

Tenant's Damages for Landlord Breach

Damage Type Description
Rent Abatement Reduction in rent proportional to the landlord's failure to provide promised services or maintain the premises. Unlike residential, no implied warranty of habitability for commercial.
Cost of Repairs If tenant performs repairs that were landlord's responsibility, tenant may recover the reasonable cost of those repairs.
Lost Profits Business profits lost due to landlord's breach - must be proven with reasonable certainty, not speculative. Requires documentation of pre-breach earnings.
Relocation Costs If constructive eviction occurs, tenant may recover costs of moving, including new location deposits, moving expenses, and temporary business interruption costs.
Consequential Damages Other foreseeable damages caused by the breach - customer loss, contract penalties, damaged inventory, etc. Must be foreseeable at time of contracting.

📊 Sample Landlord Damages Calculation

Example: Tenant Abandonment with 24 Months Remaining

Unpaid rent at termination (3 months @ $8,000) $24,000
Unpaid CAM charges $3,600
Late fees per lease $1,500
Future rent (24 mo. @ $8,000, discounted to present value) $180,000
Less: Mitigation credit (re-let after 6 months) ($132,000)
Property damage repairs $12,000
Broker commission for re-letting $8,640
Attorney fees to date $15,000
TOTAL DAMAGES $112,740

💰 Security Deposit Application

The landlord may apply the security deposit to unpaid rent, cleaning costs, and damage repairs. Under Civil Code 1950.7, any unused portion must be returned within 30 days with an itemized statement. Commercial deposits have no statutory cap.

⚠ Limitation of Liability Clauses

Many commercial leases include provisions limiting landlord liability, excluding consequential damages, or capping recoverable damages. These clauses are generally enforceable in California between sophisticated commercial parties. Review your lease carefully.

📝 Sample Language

Copy and customize these paragraphs for your California commercial lease breach demand letter. Adjust based on whether you are the landlord or tenant.

Opening - Landlord to Tenant (Rent Default)
This letter constitutes formal notice and demand regarding your breach of the Commercial Lease Agreement dated [LEASE DATE] for the premises located at [PROPERTY ADDRESS] (the "Lease"). You are currently in default of the Lease for failure to pay rent as required under Section [RENT SECTION]. As of the date of this letter, you owe [$AMOUNT] in unpaid rent and additional charges, itemized as follows.
Opening - Tenant to Landlord (Maintenance Failure)
This letter constitutes formal notice and demand regarding your breach of the Commercial Lease Agreement dated [LEASE DATE] for the premises located at [PROPERTY ADDRESS] (the "Lease"). Despite multiple written requests, you have failed to perform your maintenance obligations under Section [MAINTENANCE SECTION] of the Lease, specifically [DESCRIBE MAINTENANCE FAILURE - e.g., repair of the HVAC system, roof leak repairs, common area lighting].
Legal Basis - Unlawful Detainer Warning
Your failure to cure this default subjects you to eviction proceedings under California Code of Civil Procedure Section 1161. If you do not pay the full amount due or cure the default within the time specified in this notice, we will serve a formal 3-Day Notice to Pay Rent or Quit (or 3-Day Notice to Perform Covenant or Quit, as applicable), followed by an unlawful detainer action to recover possession of the premises, all unpaid rent, damages, and attorney fees as permitted by the Lease and California law.
Legal Basis - Tenant's Constructive Eviction
Your continued failure to maintain the premises in tenantable condition, as required by Section [SECTION] of the Lease, constitutes a material breach that substantially interferes with our beneficial use and enjoyment of the premises. The [DESCRIBE CONDITION - e.g., persistent HVAC failure, roof leaks, lack of essential utilities] has rendered portions of the premises unusable for our business operations. If you do not cure this breach within [TIMEFRAME], we will have no choice but to vacate the premises and pursue all remedies available under California law, including claims for constructive eviction, rent abatement, lost profits, and relocation costs.
Damages Demand - Landlord
Pursuant to California Civil Code Section 1951.2 and the terms of the Lease, I hereby demand payment of the following amounts within [14/30 DAYS] of the date of this letter:

1. Unpaid base rent through [DATE]: $[AMOUNT]
2. Unpaid CAM/additional rent: $[AMOUNT]
3. Late fees per Lease Section [X]: $[AMOUNT]
4. Property damage beyond normal wear: $[AMOUNT]
5. Re-letting costs/broker fees: $[AMOUNT]
6. Attorney fees incurred to date: $[AMOUNT]

TOTAL DEMAND: $[TOTAL]

This demand does not include future rent damages, which continue to accrue and will be calculated at the time of judgment. The security deposit of $[AMOUNT] will be applied to these amounts as permitted by law.
Deadline and Consequences
If I do not receive full payment of the above amount, or a mutually acceptable resolution, by [DEADLINE DATE], I will have no choice but to:

1. Serve formal statutory notices as required by CCP 1161;
2. File an unlawful detainer action in California Superior Court;
3. Pursue a separate civil action for all damages, including future rent, consequential damages, and attorney fees as permitted by the Lease.

An unlawful detainer judgment will become a matter of public record and may affect your ability to lease commercial space in the future. I urge you to resolve this matter promptly.

Please direct all further communications to [YOUR NAME OR ATTORNEY NAME AND ADDRESS].
CAM Dispute - Tenant Demand
Pursuant to Section [CAM SECTION] of the Lease, you are required to provide an annual reconciliation statement of Common Area Maintenance charges within [30/60/90] days after the end of each calendar year. To date, we have not received reconciliation statements for the years [YEARS]. Additionally, our review of the statements received indicates charges that appear to exceed the caps set forth in the Lease, including [DESCRIBE DISPUTED CHARGES].

We demand that you: (1) provide complete CAM reconciliation statements with supporting documentation for all disputed years; (2) credit our account for overpayments in the amount of $[AMOUNT]; and (3) confirm in writing that future CAM charges will comply with the Lease terms.

🚀 Next Steps

What to do after sending your demand letter for a commercial lease breach.

Expected Timeline

Days 1-3

Recipient receives and reviews demand letter

Days 3-14

Response period - payment, cure, or negotiation

Days 14-30

If no response, serve formal statutory notices

Days 30+

File unlawful detainer or civil complaint if unresolved

If No Payment or Cure

  1. Serve Proper Statutory Notices

    Before filing an unlawful detainer, you must serve the correct statutory notice. Use a 3-Day Notice to Pay Rent or Quit for rent defaults, or a 3-Day Notice to Perform Covenant or Quit for other curable breaches. The notice must be properly served (personal service, substituted service, or posting and mailing).

  2. Consult a Commercial Lease Attorney

    Commercial lease litigation is complex and procedurally strict. Defective notices or filings can result in dismissal and delay. An experienced attorney can ensure proper procedures and maximize your recovery. Many attorneys offer contingency arrangements for strong landlord cases.

  3. File Unlawful Detainer in Superior Court

    Unlawful detainer is a summary proceeding providing expedited eviction - typically 20-30 days from filing to trial. File in the county where the property is located. The filing fee varies by county (approximately $435-$450 for unlimited civil cases).

  4. Consider Separate Civil Action for Damages

    While unlawful detainer can recover possession and some damages, complex damage claims (future rent, consequential damages) may require a separate civil action. Some landlords file both simultaneously.

  5. Document Mitigation Efforts (Landlords)

    If tenant has abandoned, immediately begin re-letting efforts. Keep detailed records of all marketing, showings, and offers received. This documentation is essential to prove mitigation at trial.

⚠ Avoid Self-Help Eviction

California law prohibits landlords from using "self-help" to evict commercial tenants. You cannot change locks, remove tenant property, cut utilities, or physically remove the tenant. Such actions expose you to liability for wrongful eviction, conversion, and potentially punitive damages. Always use the legal process.

💡 Statute of Limitations Reminder

Do not delay in taking action. For written lease breaches, you have 4 years from the breach to file suit (CCP 337). For oral agreements, only 2 years (CCP 339). For more details, see our guide on California Breach of Contract Statute of Limitations.

Need Legal Help?

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