What does "material breach" mean? I'd like to give the layperson a working knowledge of this legal concept within the context of a soft economy.

Hypothetical: Assume you're the landlord of a retail development that contains common areas, the maintenance costs of which are spread proportionately among your tenants. Your oldest lease contains language that "tenant shall reimburse landlord for its proportionate share of the common area maintenance expenses by April 1 of each year." The last page of this lease contains a provision, which says that "time is of the essence with regard to the terms and provisions contained herein."

Currently, you're eight years into the initial 10-year lease term and, up until this recent credit crunch, tenant has made all lease-related payments on time. However, on this particular April 1, you didn't receive reimbursement.

On April 9, you receive a letter (and a phone call) from your tenant to the effect that their cash flow is tight, but they promise to pay in three weeks. You explain that if you don't get reimbursement in three weeks, you'll have to terminate the lease. Your tenant repeats the promise and follows up with a letter to that effect, which you receive two days later.

On April 27 (still within the three-week period), you send a letter to tenant that you are canceling the lease and entering into a new one with a new tenant. Why? Payment is almost a month overdue and, for whatever reason, you don't believe tenant will pay.

Question: Can you declare tenant to be in material breach of the lease, terminate the lease and enter into a new lease?

Discussion: Maybe. The law on material breach (in a non-goods contract) sets forth that if a party fails to perform a promise which amounts to both a material and total breach (i.e. no cure by the breaching party is forthcoming within a reasonable period of time), then the aggrieved party may