Are You an Informed Landlord?

The most recent edition of “Probate & Property,” a publication of the American Bar Association, examines how the law can help Landlords who face defaulting tenants.

Authors Marie Moore and Andrew Capitelli address several legal avenues a Landlord may wish to take, when facing a defaulting tenant. The Landlord’s options include reducing rent, reentering vacated premises, and hiring an attorney to sue for damages.

Landlords should always remember that, according to the law, a lease agreement can lack some of the strength that comes with an ordinary contract. Likewise, remedies for failing to fulfill a lease agreement differ from remedies for failing to fulfill a contract.

For example, the law may not allow Landlords to recover damages for lost profits, even when similar damages would be recoverable in an ordinary breach of contract. As Moore and Capitelli explain, “...a tenant’s obligation to pay its rent for the whole term is not as immutable as a borrowers obligation to pay a secured debt…”

The following is a list of some of the article’s best tips for Landlords:

• 
  For tenants that have stopped paying rent but have not yet vacated, the Landlord has several options. If the landlord wishes to avoid an eviction, the Landlord usually has the option of suing for the amount of the unpaid rent. On the up side: the landlord usually maintains his right to sue as rent becomes due. On the down side: the Landlord must deal with the burden suing every time rent is due.
• 
  Tenants on the verge of bankruptcy usually do not fair well with Landlords. This is especially the case when with commercial tenancies, meaning the tenant runs business on the leased real estate. In these cases, the landlord may want to consider whether the financial circumstances might allow for a limited reduction in rent, and whether such rent reduction would salvage the Landlord-Tenant relationship.
• 
  In circumstances where a tenant defaults, the Landlord's right to recover for future rent may be limited if the Landlord reenters (even when the contract permits the Landlord reenter). As such, when a Landlord deals with a defaulting tenant, he or she should know how to do so in a way that best preserves the Landlord's right to recover unpaid rent.
• 
  Lastly, the Landlord should be sure to include in the lease the necessary language to assure his default rights (which vary by state) are enforceable

Consult an attorney to protect your Real Estate needs, including your Landlord/Tenant relationship.