Can a commercial landlord help each other against a defaulting tenant? – Owner & Tenant – Leases

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Maybe, but it depends on the state the property is in

The COVID-19 pandemic has caused unprecedented financial damage to the commercial real estate sector. Commercial landlords have been forced to make difficult decisions, including whether to accept rent reductions, payment deferrals, tenant construction delays, lease renegotiations or other means of commercially achieving a result. within reason. However, many landlords had no choice or chose to pursue formal eviction proceedings – against tenants, including small businesses, restaurants, bars, etc., who have suffered financially during the pandemic and defaulted on their leases – to repossess their premises or recover what they could in unpaid rent and other rental financial obligations such as taxes and water. In less common circumstances, some homeowners have taken matters into their own hands by avoiding court involvement and exercising self-help tactics such as placing locks or chains on doors, changing locks or disabling cards -keys to evict their defaulting tenants.

For landlords operating in multiple states, hiring a law firm that knows the nuances of when self-help is allowed is essential for effective lease negotiations and enforcement. And just because a lease purports to allow stand-alone evictions doesn’t mean a court will enforce that provision. This blog highlights, for example, the different ways states are approaching a commercial landlord’s use of self-help in the event of a tenant default.

Florida

Under Florida law, commercial owners are prohibited from taking matters into their own hands. The court in Palm Beach Hotel Florida v Nantucket Enterprises, Inc., 211 So. 3d 42 (Fla. 4th DCA 2016), citing Florida Statutes, Section 83.20, acknowledged that the “only” methods a landlord can use to repossess their premises from a tenant in default are: 1) order of the court granting possession to owner; 2) when the tenant transfers the premises to the lessor; or 3) when the tenant abandons the lease. Significantly, the Court in Palm Beach Florida Hotel upheld the trial court’s award of $8.8 million in favor of the tenant after determining that the landlord – who failed to comply with the methods listed above – wrongfully evicted the tenant despite the fact that the operational lease authorized the owner to exercise his autonomy in the event of default by the tenant.

Texas

In Texas, a commercial landlord is prohibited from, among other things, interrupting a defaulting tenant’s utilities, removing doors or windows, and removing a tenant’s furniture, fixtures, or appliances. . owner code text., Section 93.002(a)-(c). However, the landlord is authorized to prevent a tenant from entering the rented premises without legal process by “changing the door locks of a tenant who is in default of payment of at least part of the rent”. owner code text., section 93.002(c)(3). In other words, while a commercial landlord cannot resort to self-help if a tenant fails to meet their non-monetary obligations, they have the right to limit a defaulting tenant’s entry into the premises. rented by changing the locks on the doors, provided that the landlord places “a written notice on the tenant’s front door stating the name and address or telephone number of the person or company from whom the new key can be obtained… [t]The new key should only be provided during the tenant’s normal business hours and only if the tenant pays the overdue rent.” owner code text., section 93.002(f). It is important to note that if a commercial landlord fails to comply with Section 93.002(g), the tenant may be entitled to recover possession of the premises, terminate the lease, and seek damages from the landlord.

Georgia

Under Georgian law, “an owner may contract to avoid [the statutory
notice and other requirements of dispossessory proceedings set
forth in O.C.G.A. Section 44-7-50 et seq.] when renting property that is not to be used as a dwelling. ” See Rucker vs. Wynn, 212 Ga.App. 69, 70 (1994). In Ruckerthe Court determined that a default provision contained in the parties’ commercial lease agreement authorized the landlord to change the locks on the doors and to enter and take possession of the property in the event of non-payment of rent by the tenant – provided that “it can be accomplished without breach of the peace” – without notice or legal recourse to enable the lessor to re-lease the premises. See id. at 71. While the parties to a commercial lease are free to negotiate the respective remedies parties for breach, including the right to exercise self-help, Georgia law neither expressly authorizes nor prohibits the use of self-help by a commercial lessor seeking to repossess the premises in the event of default by a tenant.

Oregon

In Oregon, if a commercial tenant breaks a lease, the landlord can only self-help and change the locks to repossess the premises if the lease allows it and the landlord evicts. “peacefully and without violence.” ORS section 105.105; see also Jordan v. Wilhelm770 P.2d 74 (1989), rev den, 308 Or. 79 (1989) (affirming the judgment of the defendant landlord in a conversion action which excluded the plaintiff tenant from his office).

Conclusion

For commercial landlords, deciding whether or not to pursue formal eviction proceedings can be unappealing and even frustrating. However, if you are a commercial owner considering self-help rather than formal litigation, it is imperative that you understand whether applicable law permits such recourse. Even if applicable state law allows a landlord to use self-help, either by statute or under the terms of the lease, be sure to follow all rules that govern how self-help is done. And the commercial owner should always be aware that even if self-help is permitted, such action carries risks and is not always the best course of action, as it may subject the owner to damages for eviction. illegal, trespass, conversion and other possible causes of action by the tenant.

With 27 offices across the United States, Holland & Knight real estate litigation attorneys have the experience and resources to help commercial landlords considering eviction of defaulting tenants.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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