Landlords and tenants in commercial leases have the same goal: staying open for business! But we all know that despite people’s best intentions, things can go wrong. Commercial leases are no exception. Let’s talk about some “Do’s” and “Don’t’s” in commercial landlord tenant law.
Read the Lease!
A lease is a private contract between two parties. A good lease should account for all of the problems that might arise in a landlord/tenant relationship. Landlords should make sure that the lease clearly spells out the procedure they can follow if needed. For instance, what can the landlord do if the tenant fails to pay rent? What if rent is always late? What if the tenant trashes the premises?
Tenants need to look to the lease to find out who is responsible for any problems that might arise with the property. For instance, who pays if there is plumbing or electrical damage? What can a tenant do if a landlord tries to sue them or evict them unfairly?
Both parties also need to make sure they’re considering all of the papers involved in the landlord tenant relationship. Look closely at anything marked “Addendum,” “Additional Agreement,” or anything similar. These documents will be considered a part of the lease itself under North Carolina law.
Reading the lease carefully is essential for both parties. A good lawyer can help you decipher a lease so that you know exactly what you’re getting into. Everyone should also keep a copy of their lease to refer to if a problem comes up.
DON’T Go Without a Lease!
Some people may try to make a rental agreement without a lease. They are counting on the honesty and good faith of the other party. But now that you know how important the lease is, you know that’s a terrible idea! Circumstances can change quickly in business. Even if you trust the other party, you should have a written lease to back you up just in case.
When a party “defaults,” it means they have violated the lease. The most obvious form of default is not paying rent. But, commercial tenants can default on a lease in other ways. For instance:
- Failing to have the business open during business hours.
- Conducting illegal business on the premises.
- Failing to follow health codes.
- Not properly disposing of waste.
- Failing to maintain their insurance.
- Going bankrupt.
Tenants need to understand what factors besides paying rent late can put them in default. Landlords need to understand what their rights are. Once again, all of this should be addressed in the lease.
If a landlord does find a tenant in default, the lease will usually tell them what they need to do next. Some defaults, like not paying rent, are non-curable defaults. This means that the landlord can evict the tenant almost immediately, without giving notice. Other defaults are curable. For instance, if the tenant is not properly disposing of trash, the lease might instruct the landlord to give them 30 days of notice to fix the problem. Think of default like being on probation. The lease hasn’t technically ended yet, but it might if the defaulting party doesn’t fix the problem fast.
DON’T Try to Evict a Tenant Unless You’re Sure You Can!
Landlords need to give tenants proper notice of a default. If the landlord sees that the tenant is breaking the lease, but doesn’t properly inform them before trying to evict them, it might backfire on the landlord! Landlords shouldn’t just call up the tenant to speak to them casually. They need to give them written notice of the default, by the methods specified in the lease. Usually this means sending notice return receipt requested. This means that the tenant needs to sign something acknowledging that they received the notice from the landlord. Then the landlord has proof that they properly notified the tenant. Landlords should keep copies of everything they send the tenant and a record of when they sent it. If the case ends up going to court, a landlord who is prepared with proof that they followed the law will most likely prevail.
Tenants, this can work in your favor too. If a landlord tries to evict you but hasn’t given you proper notice, you have rights! If the landlord tells you they’ll be evicting you in 30 days and then tries to evict you on day 29, you may be able to prevail against them based on that one-day difference.
When the Lease Ends, Renew It Properly!
Some commercial leases go for three years or more. It’s very important that a tenant who wants to keep leasing the property after the term ends do so according to the specifications of the lease. Usually this means having something in writing and signed by both parties.
If a tenant remains in the property after the lease has ended and continues to pay rent, and the landlord accepts that rent, things can go very badly for either party later on. When the landlord accepts that rent, they are basically renewing the lease even if that wasn’t their intention. If the landlord tries to sue the tenant later, a court might find that they renewed the lease just by continuing to accept rent and rule in favor of the tenant.
Things can also go wrong for the tenant if they continue to pay the rent they had been paying for the entire lease, but the lease says that upon renewal, the rent is to go up by a certain percentage. Let’s say that the rent was $1,000 during the lease, but when the lease ends, it goes up to $1,500 if the tenant decides to renew. If the tenant stays on the property and keeps paying the $1,000, even if the landlord accepts it, the landlord can later sue that tenant for the increased rent. If the tenant paid $1,000 every month for a year but the landlord is entitled to $1,500 every month according to the lease, the tenant would owe the landlord $6,000 plus interest at the end of the year!
DON’T Try to Go It Alone
Complicated and expensive legal problems can arise in any commercial landlord/tenant relationship. If you hire an attorney instead of trying to figure things out yourself, you may be able to successfully kick out that problem tenant if you’re the landlord. Or, if you’re the tenant, you may be able to successfully stay in the property even if the landlord is bullying you. In either situation, you may save hundreds or thousands of dollars and considerable time, effort, and stress by hiring an attorney to help you.