The Trouble With Tenants
The Trouble With Tenants
Tis the season for trouble with tenants. With the economic problems and unemployment increasing, more and more of our practice has involved representing landlords as they seek to deal with defaulting or delinquent tenants.
Whether you are dealing with a retail center, an industrial park or an office building, here are some strategies for dealing with delinquent tenants.
1. To Evict or To Work It Out?
Some tenants have stopped paying and are in no condition to ever start paying again. These tenants should be asked to leave or evicted. Some tenants, however, may be able to make partial payments and may get back on their feet. Ask yourself whether you can replace the tenant and how long will it take? How much will you spend on tenant improvements and brokerage commissions to get a new tenant? How long will it take?
Right now finding new tenants can take 6 months or more. Rents may also be significantly lower than they used to be. You may be better off working out a compromise and getting some payment compared to having an empty space that generates no rent.
2. Alternatives to Eviction.
A commercial eviction can take a month or two to complete. It also involves attorneys fees. Try these simple alternatives first: ask the tenant to leave voluntarily and agree on a deadline. Some tenants are upstanding people who understand that they need to move out if they are not paying the rent. If this doesn’t work, offer ‘cash for keys’ in which you offer the tenant some money for moving out. (Don’t pay the money until the tenant is out!).
3. Pursue The Tenant For Future Rent?
Again you have to ask yourself what the endgame will be. Many entity tenants (corporations, LLCs, partnerships) may not have any assets to pursue. If they cannot pay the rent, there is little benefit in suing them. If, however, they do have assets or there are personal guarantors with assets (such as their residence), it may make sense to file a lawsuit. In most leases you can also collect your attorneys fees.
If you have any questions about how to deal with delinquent tenants, feel free to call and we can discuss your options. We can help document agreements, help you do a cost/benefit analysis to help determine the best strategy and file commercial unlawful detainers and/or breach of contract actions.
A Stocking Stuffer
I recently read “Frank Lowy: Pushing the Limits“ by Jill Margo. Lowy started Westfield, the international shopping center owner and operator.
After escaping the Nazis during WWII, Lowy emigrated to Israel where he fought in the Israeli Defense Forces. He then moved to Australia where he started a deli in the suburbs of Sydney.
From there he got into real estate development, building bigger and bigger shopping centers. He then expanded into the United States.
His story is inspirational, both for the struggles he endured in his early life and for the simple beginnings that he turned into a global company.
Look for the profile of Laine Wagenseller in USC Law’s Fall 2009 Magazine.
Entitled State of Play, the article discusses how Mr. Wagenseller founded Wagenseller Law Firm five years ago and his goal to be the “top boutique real estate law firm in Los Angeles.” See page 31.
All the best to you and your family
Wagenseller Law Firm