Severability Clauses in Commercial Leases

Severability clauses are boilerplate these days, especially in commercial leases. Below is an example of the standard clause...

The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

But subtle changes to boilerplate items can greatly benifit your client in the event of litigation. Consider a typical commercial lease which is often pro-landlord. Any term that gets struck out of a pro-landlord lease is more likely going to hurt the landlord and be of the benefit to the tenant.

So if you are representing a landlord, consider adding the following wording to make an even better severability clause...

To the extent possible, the invalid, illegal or unenforceable term shall be replaced by a term that is legal, valid and enforceable and that comes closest to expressing the intention of the illegal, invalid or unenforceable term.

Doesn't that already look better? Adding those words to standard boilerplate now does an even better job of protecting your client. And it can get even better...

If the application of this Severability provision should materially and adversely affect the economic substance of the transaction contemplated, then the Party adversely impacted shall be entitled to reasonable compensation for the adverse impact, provided the reason for the illegality, invalidity or unenforceability of the term is not due to misconduct by the Party seeking the compensation.

That additional wording to a frequent boilerplate provision does a significantly better job of protecting the landlord. Remember, just because it's boilerplate and has been used for years as boilerplate doesn't mean that it's the best choice.

I hope this demonstrates that every part of any lease must always be closely looked at depending on who you are representing. Even the boilerplate. With contracts, words, whether they are there or not, matter.

If you have any questions or comments, send me an email tobdalton@tigusa.com. Also, if you know anyone looking to buy, sell or lease space in Dallas or the surrounding areas, I do appreciate referrals.