Protecting Commercial Landlord’s Rights – Eviction, Collection and Beyond

Posted in Bankruptcy & Creditor's Rights

Commercial landlords need to be vigilant in protecting their interests in these uncertain economic times.  Getting and keeping paying commercial tenants is the name of the game.  However, its not always that simple.  Sometimes, landlords have to make the difficult decision of whether to evict and try to collect against a non-paying tenant. The commercial landlord could be left with the tough choice of evicting a tenant and have a "dark store" until a new tenant can be found or working with their tenant by offering more favorable terms or concessions. 

Whatever business decision a commercial landlord makes, its advisable to know what your rights are, and what steps you have to make, before you proceed with a litigation strategy.  A clear strategy for dealing with non-paying tenants can help determine the success of your commercial property with existing, new and potential tenants. 

Following is a quick primer of questions to ask your attorney about both the eviction and collection process in New Jersey before proceeding with litigation.  Asking these questions ahead of time can help you make a more informed decision on how to proceed with a non-paying tenant.

EVICTION
In New Jersey, commercial landlords have the right to have a tenant evicted through a summary dispossess action (aka "eviction") for non-payment of rent.  Before attempting to evict tenants, the landlord should confirm with their attorney a number of questions, including:

  1. Has a New Jersey attorney reviewed the lease?  It is important to have an attorney licensed to practice law in the State of New Jersey review the lease to make sure that it complies with State and Federal law.
  2. Do any Federal or State statutes preempt?  Your attorney should be able to advise if any Federal or State statutes specifically define rent, which would only allow a certain portion to be collected.  If so, then you may need to re-inform the tenant of the amount due and owing before commencing suit.
  3. Does the lease provide for collection of attorney fees as additional rent? To collect attorney fees, generally there must be either a contractual arrangement or a statute that provides for such collection.  For eviction actions, to include attorneys fees as rent in the eviction complaint, it must be specifically defined as additional rent.  Just having a provision that allows the collection of attorneys fees, but not defined as additional rent, will not permit the landlord to call a default and institute an eviction.
  4. Who will testify to the amount owed? If the matter is contested, you will need to submit proofs and testimony to show the amounts due and owing.  It’s a good idea to have your attorney review the lease and accounting with whomever is to testify.  Further, its important that the person testifying have actual knowledge of the books and records, as well as authority to testify.
  5. Have all notice provisions been complied with? Before your file the eviction action, make sure you’ve complied with all notice provisions.  Your attorney should advise of the specific notice provisions that need to be followed under the lease, as well as if the Fair Debt Collection Practices Act and New Jersey Anti- Eviction Act, may be applicable.

COLLECTION
Commencing the eviction action is only half the battle for commercial landlords.  Once a landlord has obtained an order for summary dispossession, the next step is to actually evict the tenant and then try and collect money.  Following are questions to ask your attorney about what to do after the summary dispossession order (eviction order) has been entered.

  1. Is settlement possible?  At this point it may be worth attempting to speaking with the tenant one more time before the actual eviction takes place. Sometimes just getting the order for possession will bring the tenant to the bargaining table.
  2. Has the warrant been posted?  It is essential to go through with the entire eviction. This means not only obtaining the order for possession, but also enforcing it through a warrant of removal and actual eviction.  Its advisable to confirm your attorney has followed-up with the Sheriff to make appropriate arrangements.
  3. What to do with left over items?  When the eviction takes place, you may want to check with your attorney on what to do with items left in the premises. For instance, if a copy machine has been left in the premises, do you know who owns it?  If not, how do you find out?  Further what rights do you have in that equipment?  These issues should be thoroughly discussed with your attorney.
  4. How do you get paid? After the landlord has gotten possession, the next steps is getting paid.  In New Jersey, landlords usually have to commence a separate action to collect all sums due and owing.  However, before you authorize a collection action you may want to ask your attorneys about what steps you’ve done or have to do to mitigate damages.  For instance, if the lease term was 10 years and you evicted the tenant after three years, how much can you collect?  Are your attorneys fees provided to be collected in the lease?  What about improvements?
  5. Are there guarantors on the lease?  Besides suing the tenant, you and your attorney should thoroughly review the lease to see if there are other parties that you can try and collect for arrears and damages owed.

Prior to making that decision to evict a non-paying tenant, it is advisable that a commercial landlord reviews these and many more questions with a licensed New Jersey attorney.  Answering these questions beforehand can help you with the proper strategy to keep your commercial property(s) profitable in these cautious economic times.