Crime, Retail and Skipping Out

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Q: I own a small apartment building in a “rough” area. Seems like a day doesn’t go by without some sort of violent crime in the neighborhood. I have a vacancy now, and I don’t know if I have to tell them about all the stuff going on. If I did no one would rent, what do I do?

A:
In many areas throughout Southern California, crime is a fact of life. When asked by the prospective resident about crime in the area, refer them to the local sheriff or police department for statistics. Be careful not to portray your building as a “security” building or advertise it in any way that may create a false sense of security or safety. If your property presents an increased risk of harm, or has had a recent rash of criminal conduct, you may have a duty to disclose this fact to the prospective resident, even if not asked.

Q: Most of my rental properties are residential multifamily, but I have one small retail strip center in Los Angeles that I own as well. I’ve never had a problem with my commercial ten ants, but I have one who hasn’t paid rent this month. Can I use the same three-day notice to pay rent or quit that I use for my residential properties?

A:
Commercial and residential landlord tenant laws differ in many ways. One major difference between the two is the ability to accept partial rent payments after service of a notice to pay rent or quit for a commercial property, and not for a residential property.

Provided the necessary lan guage is included in the commercial notice, you may accept a partial payment without waiving your notice, and may proceed with an unlawful detainer action without having to re-serve a new notice. For that reason, all commercial notices to pay rent or quit should contain language stating that in the event a partial payment is made, it will not act as a waiver of your right to commence an unlawful detainer action. If you have served a notice that does not contain the proper language and your tenant tenders a partial payment, you may im me diately provide the tenant with a letter acknowledging the partial payment, but also stating that the partial payment will not act as a waiver of your right to proceed with an unlawful detainer action.

Other than that, review the cure periods stated in the default portion of your lease. Typically, the cure period for non-payment of rent or other monetary sums due is three days. Failure to provide proof of insurance is typically three days as well. Most commercial leases will allow ten or 30 days to cure a non-monetary breach. Ensure that the forms you intend to use are consistent with the terms you have negotiated in your lease agreement, as the terms of your lease will control.

Q: I’m in escrow to purchase a small regional shopping center and am in the middle of conducting my due diligence. I’ve gone through the leases and am having some difficulty verifying the terms of some of the tenants’ obligations. My agent, nice guy but a bit green, isn’t much help. He just wants escrow to close so that he can get paid. The seller appears to be disorganized, but not sure if he is giving me the full story. How can I be sure I’m getting the straight story?

A:
Thorough due diligence is absolutely critical to ensuring that the deal is one that makes sense to you. A good real estate agent and his broker will actively assist you in ensuring that your requests for information are properly responded to and will assist you in conducting your due diligence. Contact your broker and request that he assign a more seasoned commercial agent or broker to assist you in the transaction.

Depending on the size and complexity of the transaction, you may wish to retain the services of a real estate forensic accounting firm to verify the financials. Ensure that you have complete copies of all existing tenants’ leases as well as all addenda. Estoppel agreements signed by each of the tenants as well as the owner, affirming all of the terms of the tenancy including any options, are a must. A site visit and individual meetings with each of the tenants is advisable as well. It’s amazing what a five minute conversation with each of your soon-to-be tenants will reveal.

Q: I have a tenant who just skipped out last weekend. He’s been behind in his rent, but I was working with him and he was catching up. I got an email from him this morning confirming that he was out and that he left the keys in the unit. Guess I’m kind of glad he’s gone as I won’t have to go through the eviction process; but now what? He’s only six months into a one-year lease, and I don’t have any prospects. What is my next step?

A:
First thing is to confirm he’s out—pick up the keys and change the locks. Document the condition the unit was left in by taking several pictures of the premises. If there is damage, take detailed pictures of the damage. You will need to provide an accounting of his security deposit within 21 days if the property is residential, 30 days if it is commercial.

Now that you have possession of the premises, you have an obligation to mitigate your damages; that is, to attempt to re-let to minimize the loss that you are sure to incur. Ensure that you maintain a log and document your actions in attempting to re-let the premises. If you retain the services of a broker, ensure that he or she does the same. Your former tenant is responsible for the remaining term of the lease as well as any costs that you will incur in reletting the unit. These additional costs might include advertising fees, signage, broker’s commissions, tenant improvements for the replacement tenant, and the difference in rent for the remainder of the term in the event the replacement rent schedule is less than your existing rent schedule.

 

This article is presented in a general nature to address typical landlord tenant legal issues. Specific inquiries regarding a particular situation should be addressed to your attorney. The Duringer Law Group, PLC, one of the largest and most experienced landlord tenant law firms, and has collected over $155,000,000.00 in debt since 1988. The firm may be reached at 714.279.1100, toll free at 800.829.6994 or 877.387.4643. Please visit www.DuringerLaw.com for more information and to sign up for our periodic newsletter.

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