What to Do When Your Commercial Tenant Stops Paying Rent

Filed under: Real Estate Law

For any commercial property owner or manager, dealing with tenants who fail to pay rent is often the least favorite chore. Most commercial tenants want to pay their rent and keep the space; after all, their business success may depend upon that location. But cases do arise in which a tenant is unable to stay current with the rent. Usually, a commercial tenant is already aware of a serious problem with cash flow before they ever miss a payment. In this case, they may already be prepared to vacate the property when pushed to do so. But in some cases, property owners or managers must resort to formal evictions proceedings.

Four Questions to Ask:

Is the lease compliant with the law? Hopefully, the property manager used a lease agreement that was reviewed by an attorney and is in accordance with state laws. A clear lease agreement states clear expectations and paves the way for a much smoother eviction.

Is there a good reason for the eviction? Commercial real estate is a business and it’s rare that a property manager would even consider eviction without good reason. But the reason for the eviction must be a clear violation of the lease, and the property manager must be able to prove it in court.  Failure to pay rent is certainly a lawful reason for eviction. Other reasons for eviction may be valid, provided the tenant violated the lease terms and these violations have been documented.

Has the landlord complied with the law? Property managers should remember that a court will hear both sides of the argument. If a landlord fails to uphold his or her end of the agreement, courts often side with the tenant. Harassing tenants, turning off their utilities, removing property from the premises or changing locks are all prohibited behaviors.

Has the tenant been given proper notice?  Evictions are commonly avoided with a simple reminder or written notice. After consulting with a real estate attorney, the property manager should mail a letter to the tenant stating the violation. The letter should be mailed via certified mail or as otherwise provided in the lease and should offer the tenant an opportunity to remedy the situation and avoid eviction.

If you’ve gone through the steps above and still can not resolve the issue, the smart move is to consult with counsel to determine the best course of action and make sure that you are adhering to state laws.





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