Commercial L & T Law
Covid-19….tenants not pay rent…owners not paying mortgage..tenants declaring bankruptcy.. the Courts being closed….the Governor stopping evictions.. the new Housing Stability and Tenant Protection Law of 2019 which benefits tenants and severely hurts landlords…
All of these events – in a very short period of time – have created havoc in the already complex world of foreclosures. The changes have been so rapid that many attorneys are unfamiliar with these problems and ill-equipped to give sound advise to their clients on foreclosure issues. If you are involved in any of these problems, you should select an intelligent attorney with vast experience in foreclosure matters and an attorney of the highest character, honesty and integrity.
1. From the Landlord’s Standpoint:
A lease is a contract. The term of a lease can be for many years with hundreds of thousands of dollars (if not millions) in rent and additional rent at stake. If not properly prepared, tenants can escape payment of rent, can have the right to sue landlords, and can avoid many of the financial obligations tenants should normally have during their lease terms. Despite a lease’s importance, it is incredible how many landlords prepare their own leases by filling in outdated forms taken from the internet or use lawyers to prepare leases who lack the experience and sophistication to prepare a sound document.
For example, Covid-19 and its consequences have given tenants a great opportunity to avoid rent payments. This could have been prevented if language was contained in the lease addressing pandemics. The language might read
“Because of the potential 15-year duration of this lease and low fixed rent throughout the term, the Tenant’s performance under this lease shall not be excused for any reason including, but not limited to, an Act of God, government action, inaction or shutdown of businesses, pandemics, impossibility of performance or frustration of purpose.”
Another sound tactic for the landlord in lease preparation involves the use of “Good-guy” Guarantys. IF tenants want to abandon their leases especially because of adverse economic conditions, the tenant might reconsider if there is a personal guaranty of lease performance. In other words, the tenant might be a corporation with no real assets and can easily breach the lease because it is judgment proof. But if an individual is guaranteeing the corporation’s performance, the individual will then be personally liable.
From the landlord’s perspective especially if a lease breach is inevitable and recovery on the personal guaranty is questionable, the landlord can minimize its losses through a well-written personal, “Good-Guy” guaranty. For example, it might read:
“If the Tenant desires to terminate the lease, the Tenant may do so upon (i) giving at least a 90-day notice of Tenant’s intention to terminate the lease; (ii) setting forth the specific termination date, (iii) providing a Surrender Declaration at the time of vacating that Tenant and anyone claiming through Tenant has vacated the Premises (entire building) as of a certain date and that no one else besides Landlord has any right to the fixtures and improvements remaining in the premises and that the Premises is unoccupied and available for re-rental, (iv)paying to the landlord by certified or bank check an amount equivalent to six (6) months’ fixed rent calculated from the first day after the termination date, (v) surrendering the keys to the landlord or landlord’s surrenders its security deposit, and (vii) being in substantial compliance with lease terms when the notification of lease termination is sent.”
2. From the Tenant’s Standpoint:
Having an experienced and reputable landlord-tenant attorney is the first requirement. That attorney will counsel you and such advise could include stopping rent payments, negotiating a possible new rental agreement, seeking a rent abatement, suing the landlord, or perhaps doing nothin.