Evicting a Commercial Tenant in California
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What Is Tenancy Law?
In landlord / tenant law, the owner of a piece of property is called a "landlord," and the renter is called a "tenant.' For private residents, there are special laws in place that protect the rights of tenants. For example, private residents have the right of quiet enjoyment, without the tenant always poking around and bothering the resident. Residents also have the right to a clean, safe, and healthful place in which to live.
What are Commercial Tenants?
Commercial tenants are businesses that rent their property space, like a store or office, from a commercial landlord. Businesses are presumed to be sophisticated, knowledgeable, and savvy about the law. Therefore, business tenants are not afforded as much protection by state statutes. It is very much caveat emptor, or "buyer beware," in an alabaster jungle.
Because there is not much statutory protection for commercial tenants, the subject of eviction of a commercial tenant is very much an issue of contract law. Evictions usually happen because the tenant cannot pay rent, but it may occur because of the landlord's dissatisfaction of the use of the property. The issue is often which party breached the contract.
In California, a commercial tenant can be evicted for failing to pay a demanded amount up to 20% in excess of the rent. Businesses only have three days after being informed of the eviction to correct the violation. There is no warranty of habitability: if the roof leaks or the heater quits, it is the commercial tenant's problem. There is no statutory right to repair and deduct.
What Is the Eviction Process?
Most of the protections afforded to residential tenants do not apply to commercial tenants. When a commercial tenant is evicted, the landlord is only required to provide the tenant with three days of notice, during which time the tenant can correct the problem (such as failure to pay rent) that warrants eviction. If the tenant fails to remedy the situation, the landlord can serve them with a notice of unlawful detainer (an eviction notice), and should allow the tenant five days to leave. If the tenant fails to leave, the landlord can go to court to force them to leave. If this happens, the landlord is free to place a lock on the door, preventing the tenant from accessing the property.
At this point, the tenant only has 15 days to collect any of their possessions which they have left at the rental property. If this 15-day period passes, the landlord can mail the tenant a “notice of belief of abandonment,” which informs the tenant that the landlord now assumes that any of the tenant’s possessions remaining on the premises have been abandoned. At this point, the tenant has another 18 days to claim the property. At this point, the property may be sold by the landlord.
What Defenses Do Commercial Tenants Have?
California commercial tenants must remember that all protections and rights should be spelled out expressly in the rental contract. The law assumes that anything not in the contract was not meant to be there.
Here is a list of provisions you should think about when negotiating a commercial lease:
- Forum Selection and Remedies – These clauses declare how a dispute over the lease will be resolved and by whom. The parties can choose to engage in litigation, settlement, mediation, or any other method they believe is preferable. Similarly, the lease can spell out who will oversee the dispute resolution and what remedies a party may have if they win.
- Habitability – Remember, commercial tenants do not have a right to habitability unless it is spelled out in the lease. Thus, if you foresee that your business might inflict damage to the property over time (for example if children will be constantly running around the area), then you should push for the landlord to pick up the tab on repairs.
- Full Service – Similar to habitability, except much more extensive. This term includes things such as garbage collection, taxes, janitorial service, utility, etc.
- Net Costs – These terms can be crippling to commercial tenants since these provisions pass the landlords expenses to the tenant. Not only does the tenant pay for the cost of running his or own business, the tenant also covers the cost of maintaining the landlord’s property, such as taxes or insurance.
- Percentage Costs- In addition to the actual rent, this provision allows the landlord to take a percentage of the profits from the tenant. This provision is commonly found in retail mall leases.
- Compliance with Laws – The landlord asks that the tenant obey all applicable laws. This sounds reasonable unless the tenant realizes that the landlord is passing down the costs of complying with the ADA and other expensive laws.
- Termination and Relocation – The most insidious term of all, termination and relocation gives the landlord the ability to move the tenant or even terminate the lease.
A commercial tenancy lease is a complicated legal document. The commercial tenant would be wise to negotiate on many of these terms. The termination and relocation clause is especially bad if the landlord is allowed to move the tenant or terminate the lease at will, since such a move could single-handily destroy a business if done out of the blue. Like wish, hidden or additional costs can make running a business more expensive than otherwise predicted.
Should I Consult a Lawyer about an Eviction?
Landlord-tenant law is very difficult and constantly undergoing changes. A landlord-tenant lawyer can review the terms of a lease and help you understand your duties and responsibilities. An experienced attorney can also represent you in court.
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Last Modified: 02-21-2013 11:43 AM PST
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