Representations and warranties of lessee: Overview, definition, and example
What are representations and warranties of lessee?
Representations and warranties of a lessee refer to statements or assurances made by the lessee (the party leasing the property) in a lease agreement. These statements assure the lessor (the property owner) that certain facts or conditions are true at the time of signing the lease and throughout the term of the lease. Representations and warranties typically cover areas such as the lessee's legal authority to enter into the lease, the condition of the leased property, and compliance with applicable laws.
In a lease, the lessee makes representations (statements of fact) and warranties (promises to the lessor about future conduct) about various aspects of the lease and their ability to fulfill its terms. These representations and warranties are important because they provide the lessor with confidence that the lessee is in good standing and capable of fulfilling its obligations under the lease.
Why are representations and warranties of lessee important?
Representations and warranties are important because they protect the lessor by ensuring that the lessee has provided accurate information and is legally capable of entering into the lease. They help establish the credibility of the lessee and give the lessor the right to take legal action if the lessee breaches any of these representations or warranties.
For the lessee, making these statements is part of the legal agreement that acknowledges their responsibilities. The lessee should ensure that the information provided is accurate and truthful, as any false representations could lead to legal consequences, including the termination of the lease or claims for damages.
Understanding representations and warranties of lessee through an example
Imagine that a business, XYZ Corp., wants to lease office space from a property owner, ABC Properties. As part of the lease agreement, XYZ Corp. makes several representations and warranties, such as:
- Legal capacity: XYZ Corp. represents that it is a validly formed company, with the authority to enter into the lease agreement.
- Compliance with laws: XYZ Corp. warrants that it will use the leased space in compliance with all local zoning laws and regulations.
- No encumbrances: XYZ Corp. represents that it is not involved in any legal disputes or claims that could impact its ability to fulfill the lease.
These representations and warranties give ABC Properties confidence that XYZ Corp. is legally sound, operating within the law, and will be able to perform its obligations under the lease. If any of these statements are found to be false later, ABC Properties could have grounds for legal action or terminating the lease.
In another example, a lessee may warrant that they have insurance coverage for the leased property and will maintain the property in good condition throughout the lease term. If they fail to do so, they could be in breach of the lease agreement, allowing the lessor to seek remedies.
An example of a representations and warranties of lessee clause
Here’s how a "representations and warranties of lessee" clause might look in a lease agreement:
“The Lessee represents and warrants to the Lessor that: (a) the Lessee is a duly organized and validly existing entity under the laws of [jurisdiction] with full authority to enter into and perform this Lease; (b) the Lessee’s use of the leased property will comply with all applicable laws, including zoning regulations; and (c) there are no legal actions or proceedings pending or threatened against the Lessee that would affect its ability to perform under this Lease.”
Conclusion
Representations and warranties of the lessee in a lease agreement provide critical assurances to the lessor, ensuring that the lessee is capable of fulfilling the terms of the lease and is in compliance with applicable laws. For both parties, these representations help define the rights and responsibilities under the lease, and failure to meet these assurances could lead to legal consequences. Ensuring that these representations and warranties are accurate is essential for both the lessee and lessor to protect their interests.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.