Many commercial leases allow for assignments/sub-leases by the tenant. The lease will provide that the landlord (1) will not unreasonably withhold consent to an assingment/sub-lease or (2) specify certain criteria that must be met in order for an assignment/sub-lease to be considered. Under option (2), some landlords require that a tenant not be in default under the terms of its lease before an assignment/sub-lease will be considered. For instance, if a tenant is delinquent on rent and wants to get out of the lease and propose an assignment, the landlord will disallow out. This type of restriction is known as a “non-default” clause. The goal of the clause is quite clear: a landlord does not want a tenant to skirt its obligations by getting out of the lease leaving unpaid obligations behind. An assignee will likely not want to pick up such obligations.
A “non-default” clause, on its face, does not appear to violate Illinois public policy. Private parties are free to contract as they see fit as long as the contract does not violate the Constitution, statutes or common-law (read: judge-made law) of the State. However, there is one Illinois statute that rears its head in virtually every breach of a lease case: 735 ILCS 5/9-213.1. This statute provides that a landlord must use reasonable measures to mitigate its damages after a tenant vacates a leasehold. This means that if a tenant goes out of business and vacates the space, the landlord cannot let the space remain vacant and collect rent from the tenant. Commercial leases usually provide that even if a tenant abandons the leasehold, that the tenant will still remain liable for the financial obligations (e.g. rent) under the lease. Section 9-213.1 tempers the relative harshness of this obligation by requiring the landlord to take affirmative steps to find a replacement tenant to take over the space and pay rent. If the landlord fails to take such steps, it could be barred from collecting rent from the defaulting tenant during the period of time that the landlord failed to take reasonable measures.
But let’s say that the tenant is in default under its lease and abandons the space. The tenant tenders one or more suitable assignees for the lease. The landlord refuses to review any of the assignees’ applications citing the non-default clause in the lease. Is the landlord in the right? One could argue that the landlord has breached its statutory duty under section 9-213.1 because it failed to review the proposed assignees’ lease applications. The tenant has proposed suitable replacement tenants which could have feasibly taken over the lease and the space. The statutory duty to mitigate, which is public policy in Illinois, would trump the landlord’s reliance on the non-default clause. As applied to these facts, the non-default clause could offend public policy embodied in section 9-213.1.
Landlords should be careful when a tenant abandons a leasehold, but proposes suitable replacement tenants. Blind reliance on a non-default clause as the basis to refuse to consider reasonable replacement tenants could result in the landlord not being able to recover rent against the vacating tenant after it abandons its leasehold.
Burr Ridge Attorney 
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