The Law Offices of Peter Stanwyck represents small business clients in negotiating commercial leases and lease extensions, as well as representing the interest of commercial lease tenants when their are disputes with their landlord. LINK TO COMMERCIAL LEASE LEGAL SERVICES
This article is about protecting your business by better understanding your vulnerability when your business location is leased on a month-to-month basis or your nearing the end of a lease for a term and your lease agreement does not include an option to renew for another term.
When your commercial lease for a term has expired without an option to renew or your tenancy is month-to-month your landlord may terminate your tenancy at any time on 30 days notice and owes you no compensation for your lost business or what you may have paid to improve the property. And, unless you have a written agreement to the contrary the Landlord may keep your business fixtures if they have been attached to the property because such fixtures are considered by law to belong to the landlord. Absent an agreement to the contrary, a landlord has no obligation, in these circumstances to extend your tenancy or to grant a lease to someone you’d like to sell your business to.
Not every business is dependent on it’s location, but many, event most, are. The good will of your business may be tied to local business familiar with your location, or you may have a substantial investment in improvements to the property or it just may be too expensive to move. And, even when moving is a reasonable possibility it can rarely be well done on 30 days notice. My experience is the minimum time to effectively move a business is three to six months and that assumes you can quickly find a new location, prepare it for your business and move. When moving is necessary I advise clients to start the process at least nine months in advance.
It is so very sad to see hard working business owners lose their business and their livelihood because they did not attend to the details of securing their location. Business owners often have a very long term good relationship with their landlord which has lulled them into a false sense of belief that their tenancy is secure. But, even if that particular landlord can be counted on, the property may be sold, or the landlord may pass away or something happens so that there is a new decision maker who has no history with or affection for the business owner, And the next thing you get is a 30 day eviction notice. You’ll likely call an attorney like myself only to learn that the landlord is within his or her rights and you are left with few option other than pleading.
In some jurisdictions resident tenants have the right to just cause evictions which means that they can’t be evicted, even at the end of a lease or when on a month-to-month tenancy unless they have not met their tenant obligations such as paying rent or not damaging the property. There is no similar protection for a commercial tenant. A commercial tenant may have done everything perfectly for years but there is still no right to extend the tenancy.
What to do?
At the lease inception realize how important it is to get one or more options to renew and consider not leasing that particular space of you can’t get such options. Remember, if you have an intention to sell your business and the location is important to the business, selling can be difficult or impossible without guaranteed tenancy of five or more years. It is also useful to be sure that if you are going to install expensive fixtures which can be removed at the end of the tenancy without damaging the premises, that you have the right to remove those fixtures.
If you believe that your landlord had promised you an extended term or to give a lease to the buyer of your business, get it in writing. Even if you can’t get it writing from the landlord, confirm your understanding in a letter or email to the landlord. If the landlord does not object to your writing at least you will have some evidence of that understanding. It may not be enough evidence if the law requires a signed writing but at least it a step toward proving that the landlord made the promise and they you relied upon it.
Mostly, you must be aware of what rights you do have with respect to your tenancy and effectively plan around those rights. When you understand that your landlord may end your tenancy at any time, don’t want for the landlord to take that step. Start looking for other options and when you’ve located an acceptable alternative that will give you a lease, then go to your landlord and try to negotiate for a long term lease with or without options. Now, if the landlord says no, there is no need to panic because you already have your alternative lined up. In that situation it will be you and not the landlord who will be sending out a 30 Day Notice to terminate the tenancy and it will be the landlord who is scrambling on short notice to find a new tenant.
Disclaimer: The material in this blog does not constitute legal advice, does necessarily reflect the opinions of the Law Offices of Peter M. Stanwyck or the author of the material if not Peter Stanwyck and is not guaranteed to be correct, complete, or up-to-date. Consult with a qualified attorney to address the specifics of your circumstances.
Posted 06 / 22 / 2012
The comments are closed.