Landlords Be Wary

By Nicholas W. Vitti Jr.

While much of the media attention during the economic downturn has focused on the struggles of homeowners, rental properties have also been impacted by the difficult financial environment. Many residential and commercial tenants are no longer able to honor rental agreements that were negotiated during more prosperous times.  Landlords are being confronted with situations that demand creativity as they are forced to choose between litigation and the renegotiation of leases that may be years old.

Self-help in the context of landlord-tenant law is dangerous. In Connecticut the eviction process is draconian, and even actions that seem like common sense can have drastic and negative repercussions.  In a commercial setting the manner in which a landlord treats space that has been abandoned by a tenant can have a dramatic impact on what the landlord can collect in the event the tenant has breached their lease. Actions to collect delinquent rent must  be brought separately from actions to evict non-paying tenants. The slightest error in timing or form may cause an eviction proceeding to be delayed or dismissed.

It is within this heavily regulated environment that landlords must address issues with tenants who are failing to meet the contractual obligations of their tenancies. The basic question faced by a landlord with a struggling tenant is whether to preserve the tenancy and renegotiate the terms of the lease, or whether to seek enforcement of the existing terms of the tenancy by pursuing an eviction action or a suit to collect what is due under the lease.

Regardless of the course of action taken by the landlord, there are a few basic rules that anyone approaching such a dispute should follow.  First, know your lease.  What are the limits of your rights and obligations?  Is there a personal guarantee from the tenant? Are there notice provisions that must precede a termination?  How much time is left on the tenancy and can it be extended?  What is the current rent and how does it escalate over time? These are key terms that will impact the leverage of the parties as they approach the controversy.

Second, know your rights under the law. Has there been a violation of a statute or a municipal ordinance by the landlord that might justify the tenant’s non-payment of rent? Has there been a technical violation of a procedural requirement that will turn the process in court to your advantage?

Next, what are the business realities surrounding the situation? Does the tenant have assets that will be vulnerable to a claim for back rent, or is the tenant judgment-proof? Has the tenant guaranteed the lease with his or her personal assets, and are those assets unencumbered by other creditors?

Finally, know your market. If you proceed with an eviction is there a market for the premises being vacated, or does renegotiation of the business terms with a struggling tenant reflect the more realistic approach to mitigating revenue losses?

A pragmatic approach is best when dealing with rental property issues in this environment. Whether you are seeking to renegotiate a lease or initiate a collection suit for non-payment of rent, Cacace, Tusch & Santagata can help.