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Right to Offset
Practical Law Glossary Item 9-503-1092 (Approx. 3 pages)
Glossary
Right to Offset
In a leasing context, the tenant's right to deduct from its monthly rental obligations the tenant's costs which are incurred if the landlord defaults in its performance of certain lease obligations and the tenant undertakes to complete those obligations. A tenant's right to offset is a negotiated right which can be included in several provisions in a lease, such as the:
- Repair and maintenance provision. If the landlord has certain repair and/or maintenance obligations under the lease, the tenant may have the right to perform the landlord's obligations to repair and/or maintain if the landlord fails to perform after its receipt of a notice from the tenant.
- Casualty provision. If the landlord has certain restoration obligations after a casualty, the tenant may have the right to perform the restoration if the landlord does not perform its restoration obligations within a specified time period.
- Initial build-out provision. If the landlord has the obligation to complete the initial build-out for the leased premises, the tenant may have the right to complete the landlord's construction obligations if the landlord fails (or is unable) to complete the build-out within a specified time period.