Properties Magazine March 2017 : Page 14

The Road to Recovery Six tips for the commercial landlord when a tenant defaults By Matthew R. Duncan and Michael J. Matasich Buckingham, Doolittle & Burroughs, LLC W hen a tenant defaults on a commercial lease, such as by failing to pay rent, the landlord always asks the same two questions: “How do I recover possession of the premises?” and “How do I recover past due and future rent?” erate all of the rents due through the end of the lease term. The full amount of the rent through the end of the lease becomes due and payable immediately. What follows are six tips for the commercial landlord who wants to recover possession and rent as effi-ciently and effectively as possible. 1. Include a self-help repossession provision in the lease. An under-utilized provision in com-mercial leases is one that allows self-help repossession of the premises. Ohio law allows self-help repossession upon two conditions. First, the lease must expressly allow self-help repossession upon default. The lease must state, in effect, that the landlord may re-enter and retake possession of the premises without resort-ing to formal eviction proceedings. Second, the landlord must repossess the premises without breaching the peace. A breach of the peace occurs by any act which is likely to produce or does produce violence. Certainly, this means the landlord cannot physically remove the tenant, but even less can amount to a breach of the peace. For example, the landlord breaches the peace where the landlord appears at the premises, the tenant confronts the landlord and refuses to leave, and the landlord then refuses to leave the premises. The easiest way to repossess without breaching the peace is to change the 3. Include an attorneys’ fees provision in the lease. We’re Out to Clean Up This Town SWEEPING PRESSURE WASHING CONSTRUCTION SITES PARKING LOTS & DECKS WAREHOUSES SPECIAL EVENTS FLUSHING Lawsuits can be expensive. That is true even for actions to enforce com-mercial leases, which are relatively Matthew R. Duncan Michael J. Matasich straightforward. A provision which allows the landlord to recover expenses, locks at night, when there is little risk of including reasonable attorneys’ fees, upon any confrontation with the tenant. the tenant’s default can help alleviate the financial burden of a lawsuit. 2. Include an acceleration-of-rent R.C. 1319.02 may prohibit the recov-provision in the lease. ery of attorneys’ fees where the total Absent an acceleration-of-rents provi-rental obligation in the lease is $100,000 sion, a commercial landlord can recover or less. It is not clear under Ohio law a judgment against a tenant for past-due whether this statute applies to tradi-rent that has accrued through the date tional commercial leases. But even if of judgment. If the term of the lease the total rental obligation in the lease continues beyond the date of judgment, is $100,000 or less, it is still advisable to the landlord must bring successive law-include such a provision in the lease. A suits against the tenant to collect rent court may conclude that the provision is as it accrues – hardly an efficient way to enforceable or, at the very least, it may recover unpaid rent. give the landlord leverage in negotiating An acceleration-of-rents provision, a resolution with the tenant. however, causes the lease to work like an installment promissory note. If the tenant 4. Don’t accept rent after serving defaults by failing to pay an installment of an eviction notice. rent, the landlord has the option to accel-If the commercial lease does not have a self-help repossession provision, the formal eviction procedure requires the landlord to serve the tenant with an evic-tion notice at least three business days before filing an eviction complaint. The three-day notice must be served by post-ing it on or near the door of the leased premises, delivering it by certified mail, or by personally handing it to the tenant. Ohio law allows landlords to accept past-due rent after serving a three-day notice without invalidating the notice, as long as future rent is not accepted. However, it is advisable that a landlord 330.798.9200 | WWW.BUCKEYESWEEPING.COM not accept any rent payments after serving Properties | March 2017 14

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