And How the Donut King Prevented a Hole In Its Agreements
As a landlord you may make the occasional exception when your tenant fails to make its payments on time. But if tardy payments are endemic, you might start to wonder whether being a lenient landlord could hurt you later.
If you are allowing your tenant to make untimely payments, you will want to double check to see whether your lease agreement includes an Anti-Waiver provision. An Anti-Waiver provision ensures that you do not lose your ability to enforce your rights simply because you have waived those particular rights in the past. For example, you want to retain your right to evict the tenant if the tenant continues to miss rent payment deadlines in the future.
Dunkin’ Donuts, a leading donut franchisor found an Anti-Waiver clause to be invaluable when dealing with a difficult franchisee and tenant. The Anti-Waiver clause saved Dunkin’ Donuts from a significant financial loss when Dunkin’ Donuts finally decided to take action against the franchisee who consistently failed to make timely payments on rent and various fees. Even after Dunkin’ Donuts had sent numerous demand letters, the franchisee still owed thousands in past-due rent, franchise and advertising fees, and collection costs.
Without the Anti-Waiver provision in the contract, Dunkin’ Donuts’ past practice of overlooking defaults might have meant that the company waived its right to terminate the franchise agreement. Luckily, Dunkin’ Donuts had an anti waiver provision in its agreement:
“No failure of Dunkin’ Donuts to exercise any power reserved to it hereunder, or to insist upon strict compliance by the FRANCHISEE with any obligation or condition hereunder, and no custom or practice of the parties in variance with the terms hereof, shall constitute a waiver of Dunkin’ Donuts right to demand exact compliance with the terms hereof…”
The donut chain filed FOUR lawsuits against the franchisee for monetary damages and sought to terminate the agreement and the lease. The presence of the anti waiver protected Dunkin’ Donuts’ interests by giving it the right to cancel the agreement in the event there was a failure to pay.
So the next time you allow someone to skip a payment deadline you should check that your agreement isn’t missing an Anti-Waiver provision. This is not a clause to glaze over.