Breaking a commercial lease

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Latest post 12-01-2009 12:28 AM by 714Rae. 15 replies.
  • 04-15-2009 2:20 PM

    Breaking a commercial lease

    I have 3 more years on my commercial lease and my business has tanked in the recession. I have asked my landlords for rent relief, if I can change around my business, bring in more services, move into a smaller empty space in the mall and some other options and they have denied each. I need to leave as I have no more money to float the business. My company is incorporated, but both my husband and I signed a personal guarantee to lease. If my corporation goes bankrupt, I am still on the hook. If I go bankrupt, my husband is still on the hook. Our only asset is our home, if we change the title to my mothers name, will that protect our home?

    What other options do we have? I have tried to sell the business and sublease the space to no avail. Once I leave, I understand they will sue. I have asked them to settle with me, but no answer yet (one week later).

    help.

  • 04-15-2009 5:16 PM In reply to

    • Drew
      Consumer
    • Top 10 Contributor
    • Joined on 03-30-2000
    • PA
    • Posts 49,588

    Re: Breaking a commercial lease

    You could change the home title and record it--but you would need to be very careful to run out the fraudulent conversion time clock lest the deal get reconstructed --my guess is it takes 1 full year after its recorded --but confirm with counsel--its a high risk ploy!



  • 04-21-2009 8:14 PM In reply to

    Re: Breaking a commercial lease

    My lawyer has suggested that anything I do after the fact will not help the situation. I am at the point where I just want out of the lease. I am prepared to make them an offer to get out of it, but my landlord has not responded to my queries.

    What else can I do?

  • 04-21-2009 9:59 PM In reply to

    Re: Breaking a commercial lease

    Beautygirl:
    I am prepared to make them an offer to get out of it, but my landlord has not responded to my queries.

    And do you know why that is?

    It's because you are still there and still paying rent.

    As long as you continue to do so he has no incentive to give you the time of day.

    I can't tell you to do this, but one option is to quit paying rent, get your stuff out, and give him the keys (witnessed of course).

    When he's not getting an income and he's faced with spending his own money on litigation, that's when he's more likely to negotiate a cash settlement with you.

    Plus, once you abandon the premises back to the landlord that's when he has to start mitigating. He'll have to re-rent as soon as reasonable possible, and will only be able to win the lost rent for that period.

    Hasn't your lawyer explained all that to you?

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • 04-21-2009 11:19 PM In reply to

    Re: Breaking a commercial lease

    It will take me a few weeks to get everything sold and out. My lawyer suggested that I quit paying rent, and since they have 2 months deposit from me, wait until June! But I want to be out by May 15th.

     

    Once I am out, I have 3 years left on my lease. If I offer or suggest 3-6 months rent as a penalty, is that fair? Or should I wait to see them come after me?

  • 04-22-2009 3:47 PM In reply to

    Re: Breaking a commercial lease

    Beautygirl:
    It will take me a few weeks to get everything sold and out. My lawyer suggested that I quit paying rent, and since they have 2 months deposit from me, wait until June!

    If you quit paying rent but try to stay, you run the risk of being locked out and having your contents seized by the LL. It's better to move your stuff to storage and sell from there.

    Commercial tenancies are not regulated like resedential tenancies and there is no statutory protection against lockouts and seizure.

    And since deposits are not rent you could be one day late with May's rent and find your place padlocked. If I were a landlord and knew my tenant was already in financial difficulty I'd jump on a default on the first possible day.

    And if I was a tenant in a similar situation I'd be renting a truck and hiring a couple of guys for a midnight move out and get my equipment into storage someplace.

    Beautygirl:
    Once I am out, I have 3 years left on my lease. If I offer or suggest 3-6 months rent as a penalty, is that fair? Or should I wait to see them come after me?

    If it was me, and I was already in a hole, I'd wait. He'd be likely to win the two months he already has on deposit. I don't know about these days but two months is generally long enough to re-rent a small retail space. I certainly wouldn't start with an offer of more than two months. But, again, that't not legal advice. You do what's best for you.

     

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • 08-07-2009 8:25 AM In reply to

    Re: Breaking a commercial lease

    I also have the same problem.

     

    I signed a 3-year lease on a property in Kissimmee, FL. I was going to open a internet sweepstakes business until the law prohibited anyone from opening this type of business. I cannot honor the contract because i cannot obtain a business license and hence open my business.  I moved all my equipment out of the place but i still have the key.  I offered the landlord the security deposit and the fist month rent. He declined to release me completely out of the lease and now he threatens to sue me. Under the Florida law, what can I do? What kind of judgment will the court come down on me if he takes me to court? What tangible assets are at risk? for example, home, cars and paycheck?
    Will bankruptcy put the landlord off limit of my belongings?
    Thank you.

  • 08-07-2009 5:15 PM In reply to

    Re: Breaking a commercial lease

    jameslee09:
    I signed a 3-year lease on a property in Kissimmee, FL. I was going to open a internet sweepstakes business until the law prohibited anyone from opening this type of business. I cannot honor the contract because i cannot obtain a business license and hence open my business.

    Well, no, doesn't matter what kind of business you couldln't open.

    You rented the place for 3 years. Even if you did no business you are still obligated to the lease.

    jameslee09:
    Under the Florida law, what can I do?

    Not much.

    You're the bad guy here?

    And Florida does not require the landlord to mitigate so he could conceivably sue you for the whole 3 years, and win.

    See:

    http://www.shuham.com/...

    If you want to get out from under this, find out how much the landlord will take to let you out of the lease.

    You have a little leverage because he's losing money and there's the chance he might never see a nickel from you even if he gets a judgment.

    jameslee09:
    What kind of judgment will the court come down on me if he takes me to court?

    Up to the remainder of the rent for the 3 years.

    jameslee09:
    What tangible assets are at risk? for example, home, cars and paycheck?

    Your home is exempt in FL. Cars have a small exemption. Your paycheck can be garnished and your bank accounts siezed.

    jameslee09:
    Will bankruptcy put the landlord off limit of my belongings?

    Yes.

    Bankruptcy makes your obligation to the landlord disappear.

     

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • 10-18-2009 1:32 PM In reply to

    • zellin
      Consumer
    • Not Ranked
    • Joined on 10-18-2009
    • PA
    • Posts 1

    Re: Breaking a commercial lease

    I own a real estate company in Pennsylvania that is going out of business by the end of the year.  My house and credit cards are maxed out paying for this company and if I don't want to lose my house I have to break this lease and find a paying job.  I signed a 3 year lease that expires in July, 2011 (I'm approximately 15 months into the lease).  If I default on this lease, remove my contents, and hand back the keys to the landlord, can he gain payment through personal assets (house, cars, bank accounts, furniture, etc)?  I understand he may be able to place a lien on my house and collect, should I decide to sell it in the future.  I'm concerned about having my car seized or other personal property (living room furniture, appliances, etc). 

    It is a commercial lease, that is made out to me personally, not the company name.  I also heard somewhere that he can only collect rent for the time the office is vacant until he re-leases it to another tenant, instead of the entire remainding balance...is that true???  Thanks for your help and insight.

  • 10-18-2009 1:45 PM In reply to

    Re: Breaking a commercial lease

    zellin:
    It is a commercial lease, that is made out to me personally, not the company name.

    Then your personal assets are at risk to the extent that they are not exempt. There are only limited exemptions for cars and personal property.

    zellin:
    I also heard somewhere that he can only collect rent for the time the office is vacant until he re-leases it to another tenant, instead of the entire remainding balance...is that true???

    Depends.

    There are circumstances where the landlord has no duty to mitigate and there are circumstances where he has a duty. PA case law is a little confusing until you've studied it carefully. Here's a couple of resources:

    http://www.blankrome.c...

    And start on Page 3 of:

    http://www.acrel.org/D...

    Where actual cases are cited you can google them. But if the full decisions don't come up you'll have to visit a law library to read them.

     

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • 10-18-2009 9:55 PM In reply to

    • Drew
      Consumer
    • Top 10 Contributor
    • Joined on 03-30-2000
    • PA
    • Posts 49,588

    Re: Breaking a commercial lease

    Despite a few zig zags in PA the rules seem to say the tenant who breeches a commercial lease has a burden to mitigate the damages! So if you breech it it sure leans as if you need to hustle to find a replacement tenant or reach a $$ accord with the owner or--you appear to have your personal assets at rick--and PA is not as generous to protect personal assets in bankrupcy as was FL or TX.



  • 11-30-2009 9:53 AM In reply to

    • 714Rae
      Consumer
    • Not Ranked
    • Joined on 11-30-2009
    • CA
    • Posts 3

    Re: Breaking a commercial lease

    Hi Adjuster Jack, you are very knowledgeable!

    Would you like to do my homework for me?  lol or at least help me?  I have to do this funky assignment...

    Writing Practice

    You work for an attorney.  Your attorney has asked you to review the lease agreement he signed for the building you are in and see how he can get out of it with 6 months left on a 2-year contract.  (yea, not all assignments are billable)

     

    Write a short, two paragraph memo to me stating what questions would need to be answered, where you would find those answers, and what the possible outcome would be.  Creative thoughts are good (for this purpose). 

     

    I know it doesnt seem hard, but I really dont know what the teacher is expecting me to do.  Unfortunately I have nothing of the sort in my text book to guide me and i have been orphaned by my teacher :(

     

    I dont know where to start with my questions except, the obvious, wanting to see the contract to go over the covenants, lol.  I guess a few others would be...

     

    1. can we sublet, relet or that otherwordlet?
    2. is there a penalty in the lease?
    3. how big is the security deposit?
    4. can we make an offer to the landlord or bribe him with food and wine to let us out of the lease?
    5. are there any defects in the property, or is the landlord acting on items that need to be fixed?
    6. are there any alterations/upgrades to take into consideration?
    7. are there any unexercised options in the lease that would be helpful to take advantage of?
    8. is your goal to downsize or split altogether?
    9. Consider re-negotiating the lease terms/payment or want out completely?
    10. Will you be called to active duty with the reserves or something?
    11. is there a cancellation fee in the contract?
    12. are you terminally ill?
    13. are you filing bankruptcy? 
    14. will you be going to jail?
    15. are you prepared to pay the remaining 6 months on your lease if you or the landlord are unable to lease it?
    16. Do you have AFFLACK?
    17. Did the landlord breach his duty? and/or failing to perform?
    18. Are you willing to pull an I Love Lucy stunt to drive the landlord crazy until he begs you to move out?

    Adjuster Jack, i am not sure what my teacher wants me to do here.  I mean in all reality i would start with the reason for the move, and look at the contract, as well as inquire about any consideration that was not met... but i feel like i am not connecting with what she is looking for.

    Can you help me by guiding me to a website/article where i can get my facts on?  I have a feeling there may that 6month thing is something i should be looking out for... is there a 6 month statute with regard to CA commercial leases?  she threw that in there for a reason i am sure lol.

    Also, I am not sure if my teacher is tryin to be slick or if she just screws up all the time :/ the assignment title says apartment lease but the assignment itself mentions a commercial building.  More than likely it is just another one of her many many mistakes, but just in case there is a hidden suggestive there, i thought I would mention it.

    So far, this site is the most thorough and concise spot i have found, I even joined just to write you :)  Oh, and I live in Orange County, California, so that would be the reading i would need. :)

    I appreciate your time, but your help would be even better!!! :D  lol i am such a smartbutt today, huh?

    Thank you Thank you! and have a great day!

    Rae

     

     

     

     


     

  • 11-30-2009 10:09 AM In reply to

    • 714Rae
      Consumer
    • Not Ranked
    • Joined on 11-30-2009
    • CA
    • Posts 3

    Re: Breaking a commercial lease

    #5 should read ..... that the landlord is NOT acting on
    and I tried to add
    #19. are there any medical conditions, allergies or alike conditions you suffer from in the building or on the property your doctor would attest to and remove you from? 

    ....teacher said to be creative lolol

  • 11-30-2009 12:23 PM In reply to

    Re: Breaking a commercial lease

    Ordinarily I would decline to do somebody's homework. But you've put some thought into the questions you posted so I'll make a few comments. You're on the right track.

    One thing to understand is that commercial leases are rarely regulated by statute and I don't recall anything in CA statutes. But you can check the L/T statutes that start with Section 1940 at:

    http://www.leginfo.ca....

    Commercial leases are governed by the terms and conditions of the lease. So, what the lease says is what the parties are obligated to do.

    Let's move on to your questions. A lot of your questions can be answered by looking at the lease itself. I'll mark the questions as good or bad or iffy with a brief comment.

    714Rae:
    can we sublet, relet or that otherwordlet?

    Good. The lease will either allow it or not. If allowed, the next question is what are the conditions imposed by the landlord with regard to a replacement tenant?

    714Rae:
    is there a penalty in the lease?

    Good. There could be a penalty written into the lease. But there is also an unwritten (common law) penalty in that the landlord could be entitled to the unpaid rent for the balance of the lease or only for the time it takes to re-rent. The next question on that should be: Does CA case law require the landlord to mitigate or not?

    714Rae:
    how big is the security deposit?

    Iffy. Might mean something to the tenant as to how much money he stands to lose. But since he's going to lose it anyway if he breaches the lease, it's probably not relevant.

    714Rae:
    can we make an offer to the landlord or bribe him with food and wine to let us out of the lease?
      Bad. The real question is how much money will the landlord take to let the tenant out of the lease?

    714Rae:
    are there any defects in the property, or is the landlord acting on items that need to be fixed?

    Bad. That the landlord might be breaching a condition of the lease gives the tenant legal remedies for the breach but does not give the tenant the right to get out of the lease, only to seek remedies for the breach.

    714Rae:
    are there any unexercised options in the lease that would be helpful to take advantage of?
      

    714Rae:
    are there any alterations/upgrades to take into consideration?

    Iffy. Again, might mean something to the tenant with regard to what he's giving up. But tenant improvement stay with the property regardless of whether the tenant stays till expiration or not.

    Good. One might look for an early termination provision that might limit the tenant's cost to move out early.

    714Rae:
    is your goal to downsize or split altogether?

    Good. The landlord might be willing to move a tenant into a smaller unit to avoid the loss of the tenant. That could work if there are unrented units available.

    714Rae:
    Consider re-negotiating the lease terms/payment or want out completely?

    Bad. That's essentially the previous question reworded.

    714Rae:
    Will you be called to active duty with the reserves or something?

    Bad. While the tenant might delay a lawsuit temporarily under the Soldiers and Sailors Civil Relief Act, the lawsuit will eventually be served.

    714Rae:
    is there a cancellation fee in the contract?

    Good. But already covered in Q 2 and Q 7.

    714Rae:
    are you terminally ill?

    Bad. It's irrelevant. 

    714Rae:
    are you filing bankruptcy?

    Good. Certainly a factor in deciding to pull the plug and just abandon the tenancy.

    714Rae:
    will you be going to jail?

    Bad. It's irrelevant.

    714Rae:
    are you prepared to pay the remaining 6 months on your lease if you or the landlord are unable to lease it?

    Good. The tenant's financial condition is important (to the tenant, anyway).

    714Rae:
    Do you have AFFLACK?
     

    Ben? Or the Duck? Anyway, bad, that's irrelevant.

    714Rae:
    Did the landlord breach his duty? and/or failing to perform?

    That's a reword of Q 5. Same answer.

    714Rae:
    Are you willing to pull an I Love Lucy stunt to drive the landlord crazy until he begs you to move out?
     

    That's funny. But I wouldn't put it in your assignment.

    714Rae:
    i am not sure what my teacher wants me to do here.

    Seems clear to me. You've got the questions covered. Where you find the answers  is primarily in the lease. Anything that's not in the lease is subject to what you can get the landlord to go along with. You might add that were this a residential lease you would also be looking in the landlord tenant statutes for the rights and obligations of both parties. As for consequences of breaching the lease, they are lawsuit, judgment, post judgment enforcement that includes, but might not be limited to, wage garnishment, bank account levy, lien on home, trashed credit, seizure of non-exempt personal property.

    714Rae:
    Can you help me by guiding me to a website/article where i can get my facts on?

    For two paragraphs you've probably got all you need right here. You're not writing War and Peace.

    714Rae:
    I have a feeling there may that 6month thing is something i should be looking out for... is there a 6 month statute with regard to CA commercial leases? she threw that in there for a reason i am sure lol.

    I don't see that at all. Probably 6 months left on a 2 year lease was the first thing that came to mind. Easy numbers to think up. Again, you're being asked for two paragraphs. There's a limit to what you can put in two paragraphs and still make sense.

    Write your two paragraphs based on this discusson and post them for me to look at.

     

     

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • 11-30-2009 12:31 PM In reply to

    Re: Breaking a commercial lease

    adjuster jack:

    714Rae:
    are there any unexercised options in the lease that would be helpful to take advantage of?
      

    714Rae:
    are there any alterations/upgrades to take into consideration?

    Iffy. Again, might mean something to the tenant with regard to what he's giving up. But tenant improvement stay with the property regardless of whether the tenant stays till expiration or not.

    Good. One might look for an early termination provision that might limit the tenant's cost to move out early.

    Above came out in the wrong order. Should be:

    714Rae:
    are there any unexercised options in the lease that would be helpful to take advantage of?
       

    Good. One might look for an early termination provision that might limit the tenant's cost to move out early.

    714Rae:
    are there any alterations/upgrades to take into consideration?

    Iffy. Again, might mean something to the tenant with regard to what he's giving up. But tenant improvement stay with the property regardless of whether the tenant stays till expiration or not.

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
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