Implied Covenant of Good Faith and Fair Dealing

• Every commercial lease agreement must follow the implied covenant of good faith and fair dealing. In short, it’s a rule used by courts that requires both parties to fulfill a contract as intended – i.e. both parties’ reasonable expectations must be met.

• The implied covenant of good faith and fair dealing prevents any party from violating a contract, even if it doesn’t prohibit a particular action. However, courts cannot use good faith to contradict or change any of the contract’s terms.

Statutory Notice Periods

Commercial lease agreements in Delaware follow Part IV and Part IV of the Landlord Tenant Code Title 25. General contract principles also apply. Delaware has no statutory notice periods – any notice period is previously agreed upon as part of the agreement.

Here are the most common notice periods based on the state’s landlord-tenant code:

• Termination by both parties – 60 days

• Renewals with amendments or modified provisions – 60 days

• Objection to modified provisions – 45 days

• Code violations by the landlord – 15 days

Security Deposits

• There’s no limit on how much landlords in Delaware can require as a security deposit on a commercial lease.

• Delaware has no laws to regulate the return of security deposits in commercial leases.

• Unlike residential leases, commercial landlords in Delaware can combine security deposits with other funds.

• According to state law, landlords don’t have to hold their tenants’ security deposits in an interest-bearing account or pay any interest.

Disclosures

Disclosures are obligatory in any lease agreement, including commercial leases. A property can only be rented if the agreement includes the following disclosures:

• Information regarding the landlord or agent’s name, contact details, and address.

• Properties built before 1978 must include a lead-based paint disclosure.

• Commercial landlords who acquire public utilities (e.g. water, waste disposal, electricity) can only charge tenants for the metered amount.

• Confession of judgment (an agreement where tenants accept liability for damages, allowing the landlord to enter a judgment without notice) is prohibited in Delaware.

• The landlord must pay all taxes unless specified in the agreement. Any taxes paid by the tenant may be deducted from rent.

• Tenants may sublease the property unless specified otherwise.

Termination and Renewal

• A Delaware commercial lease agreementmust include termination and renewal terms. These include how long each term is valid for – this is usually between five (5) and ten (10) years for commercial leases.

• The contract must specify the termination and renewal notice periods, which are usually 60 days. Commercial leases don’t renew unless notice is provided. The landlord should also state the notice period for evictions related to damages or non-payment.