69 - August 2012
Commercial and Retail Leases Special
Whether you are a landlord tearing your hair out with non-paying tenants or a commercial tenant whose business is going through a down patch and are worried about being thrown out, there are certain things that you should know.
Commercial Landlords Ejecting Tenants: More Strategy Less Testosterone - It’s Cheaper
The first sign that your tenants will stop paying rent is that they will start being nice to you. Treat birthday cards, chocolates and even enquiries as to your health with suspicion.
Landlords may not be universally popular, but they can take comfort in the fact that courts love them and hate commercial and retail tenants who cannot pay.
Nevertheless, court actions do cost money, especially if the proceedings are defended, and as much as judges love landlords, they can go all legal.
For instance, they can find that your Notice of Default was defective because:
In fact, judges can find all sorts of defects in your notice.
You could always serve another Notice of Default to correct the error, but if you have thrown the tenant out it is too late.
A lease is a contract, and if you have terminated the lease without giving the correct notice required by the terms of the lease, then it is you, the landlord. who is in breach. You have let your tenant off the hook as they are no longer obliged to pay from the time that you unlawfully terminated until the term of the lease expires. Worse still, their guarantor does not need to pay either. There may even be other claims by the tenant due to your unlawful action, even though it was the tenant who did not pay rent.
Just as in the episode of Fawlty Towers where Basil told all the guests to leave, landlords showing their commercial tenants the door should think about it first and not rush in to things.
(c) Paul Brennan 2010 All rights reserved.
How Landlords Can Wrest Defeat from the Jaws of Victory
- Difficult but Not Impossible
Courts usually apply the same judicial consideration to a dispute of $1 or $50M, whereas for commercial landlords, rent arrears of $1 are bearable, but anything over $50 can be stroke inducing. Often landlords adopt the immediate, aggressive and highly satisfying response of kicking out the tenant, changing the locks and using a security guard to bar the door.
There is some fancy legal footwork that the tenant can use to seek relief from forfeiture, but the court will usually not give any such relief if the tenant owes rent and does not repay it before the hearing, which understandably, is not an option for most defaulting tenants. The landlord’s legal and other costs are claimed from the tenant.
Like administering electric shock treatment, landlords often find it hard to stop and the blitzkrieg continues with the issue of court proceedings. At that stage, there is an overwhelming urge on the part of the landlord to stop spending money, impose unreasonable, humiliating terms of settlement and insist on ruinous reparations.
Tenants are usually ready to surrender and enter into a settlement with the landlord. But landlords who want three pounds of flesh rather than the usual one, can spook the tenant into defending the action for fear of losing the family home. This is bad news for the landlord as a defensive position is often easier than being on the offensive.
Landlords facing an expensive court action against a tenant with no money can ask for summary judgment i.e. you have a lay down hand and there is no real defence. This can be difficult to prove especially if the landlord has acted unreasonably. There may even be a counterclaim. Afterall, courts like to give defendants their day in court. If courts excluded people who could not afford litigation, judges would have nothing to do.
By being overly aggressive, landlords can wrest defeat from the jaws of victory by making it a far more expensive exercise than it needs to be.
(c) Paul Brennan 2012. All rights reserved.
Retail Shop Leases in Queensland -Why Must the Landlord Suffer?
You are a firm but fair landlord. Your tenants dislike you but they would, wouldn't they? You enjoy being in charge and appreciate the support given to you by the courts which give tenants' complaints that leases are “unreasonable, mean and petty” short shrift.
You decide to venture into retail shop leases. But the government has passed legislation to protect tenants and ensure that they know what they are getting into, so retail shop leases do not allow landlords the same leeway.
THE TEN THINGS TO KNOW ABOUT QUEENSLAND'S RETAIL SHOP LEASES
The suffering is not all one way. You know how much tenants hate spending money on lawyers? Well, the government makes the tenant go to a lawyer to get a legal advice certificate.
Why would the Queensland Government do this to you? Perhaps you may recall a Chinese proverb which says, “A man without a smile should not open a shop.” Of course, that is in China not Queensland. Some Queensland retailers seem very unhappy indeed. In that way that some teachers hate kids. Take a trip to a few shops and enquire “How’s business?” and you will appreciate that they have enough on their plate, that is why the government has had to act to cheer them up as it was ruining, the tourist industry.
Has it worked? Well as Chinese Premier Zhou En Lai said in the 1970s when asked for his assessment of the impact of the French Revolution, "It’s too early to tell."
I hope this helps.
(c) Paul Brennan 2008. All rights reserved.
Paul Brennan is a property and commercial lawyer practicing on the Sunshine Coast. To contact him call 07 5438 8199 or email email@example.com or go to the website of Brennans solicitors for more information.
The feed back so far on How to Make a Funny Legal Presentation...and other things that they didn't teach you at law school has been good, including Craig Allingham who said that the book is wasted on lawyers because they think they know everything. Of course, we knew that.
I just hope Craig does not team up with Martin Grunstein.
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Disclaimer: The content of the Law & Disorder eZine is to give you legal basics and in some instances, included unashamedly to try and make you laugh. In law, it is sometimes difficult to work out what is serious and what is just for fun. Therefore, if you plan to do anything legal, rely on your own lawyer’s advice or instruct me to look at the particular facts of your case. Not only will I deny responsibility for the legal content but also for some of the jokes.