Commercial Lease Agreement: Should You Sign a Lease with a Confession of Judgment for Money?
You finally found that perfect retail office or industrial commercial space for your business...or so you thought, until you got the lease. Attempting to read the legal document, you soon feel overwhelmed by the complicated wording. You finally decide that you must seek assistance from an attorney. A recent small business in Philadelphia, which was a client of ours, contacted us at Lopes Law. They felt overwhelmed and frustrated.
The call with our client went something like this:
Client: "Hi, I heard about your firm from G****** and they suggested that I should reach out. I am renting some space for my business, and I cannot make sense of the lease."
Lopes Law: "No worries, we can certainly help and I appreciate you giving us a call. Can you tell us a little more about your business, and what your concerns are with the lease?"
Client: "I have signed leases before. This one, however, has a lot of legal terms. It includes "Confessions of Judgment" and a "Surety" Agreement (more on this in another blog post) with the lease agreement. I am just a little overwhelmed and concerned about what might be in this agreement."
Lopes Law: "No problem at all, as we said we are happy to help. We understand where you are coming from, and these lease agreements can cause a lot of apprehension. We have been negotiating leases for many years. We charge flat fees for either a detailed lease review and legal opinion, or for lease negotiations. If you require it, we can negotiate your lease for you."
That conversation (and the lease review) led to this post. As a business owner, you know that signing a commercial lease agreement is a big commitment. It's important to carefully review the terms of the lease before signing on the dotted line. One clause that often causes concern is the confession of judgment for money. We have created this blog post to shed some light on what a confession of judgment is, the potential risks involved, and whether you should sign a lease with this clause.
What is a Confession of Judgment for Money Damages?
A confession of judgment for money is a legal clause found in many different legal documents and agreements (for our purposes, we'll be focusing on commercial space lease agreements). It enables a landlord to get a judgment against a tenant without going to court. The tenant agrees to let the landlord get a judgment against them if they default. This judgment will be obtained without a trial or other legal proceedings. More technically, the confession of judgment typically states (something along the lines of) "any lawyer, including landlord's attorney, can enter judgment against the tenant." This judgment can be for all amounts owed by the tenant (including monthly rent, security deposits, attorneys fees, late fees and penalties, interest, and all sorts of other monetary damages that can significantly increase what you end up owing the landlord).
A confession of judgment for money is a powerful legal tool. It can have significant consequences for tenants who sign commercial lease agreements. This document is typically included in lease agreements, for office space or other commercial property, to provide landlords with a streamlined way to recover unpaid rent, damages, or other expenses (as we mentioned above) in the event of a default by the tenant.
The confession of judgment allows landlords to bypass the normal court process and obtain a judgment against the tenant quickly and easily. This can be advantageous for landlords, who may not want to spend time and resources pursuing a defaulting tenant through the courts. However, it can be detrimental to tenants, who may find themselves on the hook for substantial amounts of money without the opportunity to defend themselves in court.
It's important to note that confessions of judgment are not universally accepted in all states. Some jurisdictions have outlawed the use of confessions of judgment, while others have placed limitations on their use. For example, in Pennsylvania, confessions of judgment are legal, but they must be accompanied by an affidavit of non-military service to ensure that the tenant is not a member of the military, who are afforded certain legal protections.
If you are considering signing a commercial lease agreement that includes a confession of judgment for money, it's important to carefully review the terms and see