Having Tenant Initial One Lease Page May Make Provisions on Others Harder to Enforce

Leases are long, complicated documents that only attorneys read word for word. Accordingly, landlords and other lease drafters may use different techniques to draw attention to part of the lease that they think are really important. One example is by having the tenant initial pages containing key provisions. Initials serve as a kind of acknowledgement that the tenant saw the page and understood it carried a degree of gravitas. The problem with this technique is that it can have precisely the opposite effect for pages the tenant doesn’t initial. And that might make it harder to enforce the provisions those pages contain.

Initial Problem

A New Orleans landlord recently learned this lesson the hard way. The landlord leased four floors of space for use as a restaurant that serves food and alcoholic beverages. The tenant agreed to make the renovations and take responsibility for getting all the necessary permits. So, you can imagine the tenant’s consternation in discovering that there were permitting and construction issues that precluded using the property as a restaurant—and that should have precluded its use as such in the past. Worse, whoever got the original permits misrepresented the space as having just one floor.

Not surprisingly, the tenant asked the landlord for an explanation. But the landlord refused to discuss the issues or how to resolve them. Five days later, it sued to evict the tenant. Not wanting to give up on the space, the tenant asked the court to declare that it was entitled to a rent abatement and damages and could continue paying rent to the court rather than the landlord.

At first blush, the tenant appeared to have a strong case. After all, every commercial lease contains a landlord’s warranty, whether express or implied, that the property is suitable for the tenant’s purpose in leasing it and free of defects that would prevent such use. The problem is that the lease in this case also included language stating that the landlord “shall not be liable for any latent defect in the leased premises or in the building of which they form a part.” The landlord claimed that by signing the lease, it accepted this language and thus waived the warranty.

As in most states, tenants in Louisiana are allowed to waive the warranty of suitability. But is that really what the tenant had done? To be effective, a waiver must be in clear and unambiguous language that’s brought to the tenant’s attention. The “not liable for any latent defect” clause was clear enough. The question is whether the landlord did enough to bring it to the tenant’s attention. The court said no, noting that the language:

• Was contained in the middle of a paragraph in the same size and font as the rest of the lease with nothing to make the provisions stand out; and
• Was not on one of the pages the tenant initialed.

Consequently, the court ruled that the waiver was unenforceable [Tales IP, LLC v. Common-Camp, LLC: 2019 U.S. Dist. LEXIS 148316, 2019 WL 4141046].

Three Ways to Protect Yourself

There are three things you can do to ensure that a court doesn’t strike down a part of your lease because you didn’t do enough to bring it to a tenant’s attention:  

Lesson 1: Give Key Provisions Their Own Paragraph. Provisions you want tenants to notice should be set out in a separate paragraph and not buried deep within the bowels of longer paragraphs.

Lesson 2: Use Visuals. Use boldface, italics, variations in size or font, or other visual techniques to make crucial provisions stand out from the rest of the lease. This is especially true of language in which a tenant purports to waive significant lease rights like the warranty of suitability.

Lesson 3: Avoid Selective Use of Initialing. Be careful with initials and recognize that having a tenant initial one page may make it harder to prove that you brought its attention to the other pages that were not initialed. One solution is to have the tenant initial every page of the lease.

Example: The court that refused to enforce the waiver in the Tales case cited another case in which a court found that the landlord did do enough to bring the tenant’s attention to a waiver. The difference that made the waiver enforceable:

• The waiver language was boldfaced;
• It was set out in its own paragraph; and
• The tenant initialed every page of the lease.