A CA Commercial Tenant’s Options When Receiving a Pay or Quit Notice

Laine Wagenseller of Wagenseller Law

In California, a commercial landlord has the ability to demand that rent be paid on the first day of the month, or the first day of any other periodic term as set forth in the lease. Although leases may allow for a grace period, such as allowing tenants to pay within three or five days of the first day of the month, there is no state law that demands such a grace period be included in a lease agreement. As soon as a commercial tenant misses making a rent payment – which can be the end of the first day of the month if there is no grace period – the landlord can begin the process of eviction of that tenant. The first step in an eviction (or unlawful detainer) process is to present the commercial tenant with what is commonly called a “pay or quit notice.” The commercial tenant has several options at that point.

What a Pay or Quit Notice Is

Although California state law does not use the phrase “pay or quit notice,” the notice is required under the law to begin the process of an eviction. A landlord can choose to give a tenant a pay or quit notice as soon as possible after the rent goes unpaid (again, the 2nd day of the month where there is no grace period).

The pay or quit notice is a demand from the tenant to pay the rent due within three days or else face eviction proceedings. The notice should include the following information:

  • the amount of rent which is due
  • the name, telephone number, and address of the person to whom the rent payment shall be made, and
  • if payment may be made personally, the usual days and hours that person will be available to receive the payment

The notice can be served on the commercial tenant 1) personally, 2) by leaving it with a person of suitable age and discretion at the commercial property and then also mailing a copy to the tenant, or 3) if no suitable person can be found, then by affixing a copy in a conspicuous place on the property, and also sending a copy through the mail addressed to the tenant.

What a Commercial Tenant Can Do Upon Receiving the Notice

If you as a commercial tenant receive a pay or quit notice, there is little time to delay in responding.

Your first option is to simply pay the amount due to the landlord per the terms of the notice. If you pay the rent due within three days of receiving the notice, then your landlord will not be able to pursue an unlawful detainer (eviction) proceeding against you.

If you either cannot pay rent or are unwilling to pay rent, you also have the option of avoiding an eviction lawsuit by vacating the property within the three days (the “quit” option), and returning your keys to the landlord. The landlord will still have the option of pursuing the rent owed on the property, as well as future rent payments still covered by the lease, but at least an eviction proceeding on your record can be avoided.

Finally, you can stay on the property and not pay the rent, but the landlord will be able to proceed with an eviction action as soon as the three-day period is up. If the eviction action is successful, the landlord can retake the property and still have the right to pursue you for any rent payments due under the lease.

If you believe the commercial landlord has not fulfilled its obligations under the lease, and that is the reason you are withholding rent, you run a high risk of an eviction by not paying the rent due. Once an eviction proceeding starts, you will not have the ability to avoid the eviction proceeding by paying the rent due. There are other legal strategies to pursue in attempting to compel a landlord to comply with the terms of the lease, and you are advised to work with a real estate litigation attorney to pursue those options.

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