How to Evict a Commercial Tenant
If you have a tenant renting commercial space from you and they haven't paid their rent or they've violated the terms of their lease agreement, then you may want to consider evicting them. However, eviction should come only after other reasonable efforts have been made to work out problems with tenants.
Evicting a commercial tenant takes time and is often expensive. You will have an easier time proving a tenant is in arrears (owes you money) than you will another breach of the lease agreement. But, in all cases, when evicting a tenant, the burden of proof is on you to show you have just cause.
Make a Business Decision
All business owners can be subject to cash-flow problems from time to time, but if your tenant is either unable to pay rent or unwilling to work with you to get rent payments current, you cannot simply change the locks on their doors and hold their business hostage. You must go through certain steps to have them legally evicted.
Before you decide to evict your tenant, consider the business aspects. How long will it take you to lease the property again? Will you have to put in a lot of money for repairs? Is the tenant having momentary financial troubles or unlikely ever to get and stay current on their rent? Will you have to go to court?
If you decide that evicting a tenant is the right business decision, then it's best if you start the process as soon as possible. Each day you're unable to rent the space out to another tenant is another day you're losing money on the property.
Hire a Lawyer
Some of the special tenant rights provided by law for residential tenants are not extended to commercial tenants. Business tenants are far more vulnerable to landlord abuse than are residential tenants, but this does not mean as a property owner you can violate the laws in your state.
To evict a commercial tenant for not paying their rent, you need to be familiar with the law or hire an attorney to help you file an eviction order. How you proceed may also be impacted by whether or not the business is a corporation or partnership, or if the lease was personally guaranteed by the business owner.
The attorney you hire should actively practice business law and preferably should specialize in commercial business transactions. The forms, laws, and processes for evicting a residential tenant are not the same as those for evicting a commercial tenant.
Some attorneys charge a flat fee, others an hourly rate, but most will also charge you for court costs, filing fees, and even time you spend on the telephone with the attorney and postage and document copying costs. To avoid hidden costs be sure to ask about all fees you may incur before you retain a lawyer.
Find out If Your Tenant Has Filed Bankruptcy
Evicting a tenant who has already filed bankruptcy, or who files for bankruptcy after the eviction process has begun, can be complicated. Some laws allow commercial tenants to stop the eviction process when the bankruptcy court is involved, and, in such cases, it's best to hire an attorney.
Although federal commercial tenant bankruptcy laws changed in 2005 to favor to the landlord, individual state laws may still impact evicting a commercial tenant for nonpayment of rent.
If a tenant has already filed bankruptcy prior to a landlord attempting to evict for failure to pay rent, an automatic stay in favor of the tenant will prevent the landlord from giving the tenant a termination notice or from beginning the eviction process.
However, the landlord may still proceed with the eviction by asking the federal bankruptcy court to lift the stay. In most cases, the judge will lift the stay because a lease agreement has no effect on the value of the tenant's estate.
If the tenant files bankruptcy after the eviction process begins, federal law sides with the landlord. However, some states allow the tenant 30 days from the eviction judgment to cure the debt.
Steps Involved in Evicting for Non-Payment of Rent
Give Notice of Default: Even if your lease does not require you to do so, always send the tenant a default notice (Notice of Eviction) indicating that rent is past due and you will proceed with eviction if the rent is not paid in full within a certain time frame (this may be the time frame as indicated in the lease agreement or a longer date you may opt to set to give more time to the tenant to pay).
Do Not Accept Partial Payment or Keys: According to Minnesota business law attorneys, Jacob C. Hendricks and Jon L. Farnsworth, "Landlords may unintentionally forgive a breach and be precluded from evicting tenants if partial payment of rent is accepted. Similarly, a landlord who accepts the tenant's keys prior to the termination of the lease and without any other written agreement may be precluded from collecting future rent from the tenant."
Start the Court Process: Once the date you gave your tenant to pay in full has passed, your lawyer will serve the tenant with a formal eviction notice and file with the court to schedule an eviction hearing.
A judge may rule that the tenant must vacate the property immediately or may give them a few days. A judge will also likely rule and give the tenant the option of repaying the rent debt over time. The tenant may also be held financially responsible for future rent loss until the property is rented again.