Rent Due, Commercial Leases, Troubled Former Tenants

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Q: Is it true that even though my rental agreement says rent is due on the first, there are times when the due date actually slips a day or two?

A:
Yes, when the first of the month falls on a weekend or a holiday, the actual “due” date will slip to the next business day. Just last month, in September, the first fell on a Saturday. Since the first was a weekend and the following Monday was Labor Day, the rent due date rolled until the next business day, Tuesday, September 4. This means that rent that was normally due on the first, was actually “due” on Tuesday, September 4, and would be considered late on September 5. This is important to know because in the event you served a three-day notice to pay rent or quit demanding September rent prior to Wednesday, September 5, 2018, then the notice was defective, as it was served prior to the rent actually being “late.”

Q: I am about to enter into a five-year term lease for an industrial unit in Southern California. The unit has been vacant several months and I don’t want to lose this deal as it seems like good tenants are kind of few and far between lately. We’ve agreed on just about all of the deal points except a couple. At the last minute the tenant requested the lease be prepared with a subsidiary of his company rather than the parent company, saying it is for “tax reasons.” Additionally, he wants to make the use provision extremely broad rather than specific, allowing him to do just about anything in the premises without having to get my permission. He knows I need to lease the space, but I’m not sure I want to give in on these points. What are my options?

A:
Negotiating commercial leases involves a bit of horse trading. Often, terms that are very important to your tenant may not be so important to you, and vice versa. Knowing the pros and cons of each deal point allows you to knowingly accept or reject certain risks when considering certain requests.

Generally, parties meet somewhere in the middle of a request, allowing certain concessions, but protecting the interests of the Lessor. The tenant’s last-minute request to substitute a subsidiary in its stead is an attempt to shift the risk away from the financially stable parent company, and obligate a less financially qualified entity, often times a mere shell, with relatively few assets.

Screen the proposed replacement tenant as you would any proposed tenant to determine if it meets your rental criteria. Is it an existing concern or a new entity recently formed solely for the purpose of signing this lease? Is it an independent business concern generating its own revenue stream? With its own assets? Or merely a subsidiary of the parent with no independent means of sustainability. There are many options to offer that would allow the tenant to satisfy his “tax reason” while still protecting the Lessor’s interests. You may allow the replacement tenant, but require the parent company to guaranty the lease. The guaranty can range from an unconditional full-term guaranty to a limited guaranty based either on a certain period of time, or a certain maximum exposure. An increased security deposit adds protection as well. Options such as an irrevocable declining letter of credit issued by a reputable financial institution allow parties to salvage deals that might otherwise fail.

Use provisions are important for a number of reasons. It is important that the tenant’s use does not overburden the facility, or interfere with the neighbors. Certain unacceptable tenant uses may involve high levels of noise, or the use of corrosive or carcinogenic materials, or other toxic byproducts. As your facility is an industrial complex, parking is no doubt limited. It is important that the approved uses do not over-burden the limited available parking. Rather than approving a very broad undefined use, it is better to identify the allowed use, but allow the tenant to request approval for a change of use in the event its operations change in the future.

Q: I’ve been reviewing my tenancy files and realize that most of the information is outdated. The phone numbers, job info and vehicle information is all from when the tenants first moved in, some many years ago. I’m not even sure who lives in each unit, as many have changed roommates. What is the best way to correct this mess?

A:
Many landlords find themselves in exactly your situation. As you surely realize it is very important to actively manage your units and keep your records up to date. It is good business practice to update resident contact information at least once a year. Rather than just circulate a blank rental application and ask your residents to complete it, prepare a specific request for specific information that you’d like from your residents. The type of information you should have, and maintain current is a list of all occupants, email and telephone contact information for each, and both evening and day phone numbers for every occupant. Periodically make photocopies of your tenants rent checks to gather bank account information for your files in the event you ever need to collect from them. Note license plate numbers for vehicles and keep abreast of changes in employment throughout the tenancy, as best you can.

Q: I was recently called by another landlord requesting reference information on one of my past residents. This particular resident was a genuine pain in the rear, and the day she moved was one of the happiest days of my life. I also know that this particular ex-tenant is no stranger to the courthouse. She seems to have her own personal lawyer with way too much time on his hands, who likes to sue anyone and everyone she has a bad experience with. Now that she’s gone, I really don’t want to have anything to do with her ever again. I am afraid that if I say anything against the tenant, and the new landlord rejects her, then she might sue me. If I give her a glowing recommendation, and the new landlord relies upon my statements, what happens when he finds out the truth, that she really is the tenant from hell?

A:
A former landlord who is asked to provide a reference for an ex-tenant must be careful to provide accurate and truthful information. If a former landlord misleadingly gives a good recommendation about a problem tenant, the landlord may be liable to the new landlord who relies on the information and is damaged. It is the policy of many landlords to not respond to subjective inquiries; that is, questions such as “Was she a good tenant?” or “Would you rent to her again?” Many landlords enact policies to provide neither good nor bad references, and only confirm specific objective information such as rental rate, and dates of occupancy.


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. Stephen C. Duringer is the founder of The Duringer Law Group, PLC, one of the largest and most experienced landlord tenant law firms in the country. The firm has successfully handled over 255,000 landlord tenant matters throughout California, and has collected over $155,000,000.00 in debt since 1988. The firm may be reached at 714-279-1100 or 800-829-6994. Please visit www.DuringerLaw.com for more information.

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