Hot commercial market creates risk for small business tenants
To avoid falling into the trap of eviction, follow these basics.
Today’s booming commercial market commands premium rental rates and offers great benefits to property owners leasing space to all types of small businesses. The market, however, can present a challenge for tenants – from restaurants to retailers – that lease that space.
So, what’s a commercial real estate owner to do? Many landlords are loyal to their tenants and only increase rates at the end of the current lease. Others take a more aggressive approach. They actively find creative ways using lease restrictions to evict tenants. While this isn’t necessarily fair, it is legal.
In this scenario, a landlord has the lease reviewed by an experienced attorney. The attorney will scour the contract to pinpoint ways to force a legal eviction. If tenants take one misstep, they could be evicted. At the end of the eviction process, tenants may be left with no choice but to pack up and leave, even if the small business is prospering and successful.
Small business owners can protect themselves from this eventuality by knowing all the requirements of their lease. However, since business owners must focus on their core business, it’s a stretch to think they can take the time to thoroughly digest every detail of a 100-page lease. It’s best for business owners to have an attorney examine the lease to identify areas that need particular attention.
An attorney specializing in tenant-landlord issues will see potential problems much more readily than the tenant. After an attorney’s review, the tenant can be assured that every detail and technicality, including exercising options in a timely manner, are handled appropriately.
To avoid falling into the trap of eviction, follow these basics:
Pay rent scrupulously
Never miss a payment and pay on time. While this is the most obvious requirement of lease agreements, it’s also the number one reason landlords terminate them. How quickly a tenant can be evicted will depend on the specifics of the lease agreement, but most leases require landlords to give tenants notice of a material default and an opportunity to cure the default. If after proper notice, the tenant fails to take corrective action, the landlord can terminate the lease. In Florida, tenants are given a 3-day window to remove assets from the property and vacate the premises.
Take care of property maintenance, taxes, repair and improvement costs
Like missing rent, failing to pay for property maintenance, repairs or improvements as required by the lease can result in lease termination. Florida generally requires a 15-day notice for this type of eviction. Again, know what’s in your lease and pay on time.
Improvements to properties particularly come into play when the tenant is a restauranteur. Restaurants have high build-out costs, and while the landlord often provides monetary assistance to improve the property, it usually doesn’t cover the entire cost.
That means that new restaurants often go into debt and sometimes go under. In these cases, landlords walk away with a completely set-up restaurant that they can rent at premium prices to the next tenant. It’s a win-win for the landlord, and a lose-lose for the small business owner.
Make sure liability insurance is up to date
Most commercial landlords require liability insurance to protect them from legal responsibility for an accident, injury or other incident at the tenant’s property. Lapsed coverage can provide a reason for landlords to begin eviction proceedings.
Know critical lease dates
Critical lease dates are times when the tenant or landlord must take action by a specific date. In the case of a landlord looking to evict, the most important hard deadline is included in the option-to-renew clause.
If tenants miss this date, they lose the right to renew the lease. Landlords looking to replace the current business with a higher renter, may choose not to notify the tenant of the upcoming option to renew with the hope the tenant will overlook the notice date.
The bottom line is that small businesses need to be on guard to protect themselves from eviction, in today’s booming commercial market. Knowing the ins and out of their leases – or hiring an attorney to provide expertise – is key to continuing to thrive in their current location.
Chad Van Horn is founding partner attorney at Van Horn Law Group, P.A., one of the top five bankruptcy firms in state and the largest bankruptcy firm in Broward County based on cases filed over the last 12 months (www.pacer.gov). Headquartered in Fort Lauderdale, the firm also has offices in the Orlando area, Miami Lakes, Doral, North Miami, Miramar and West Palm Beach. For more information, call (954) 637-0000 or visit www.vanhornlawgroup.com.
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