Articles Posted in Commercial Leases

There are many things that a commercial tenant must consider once it signs a lease. One thing most tenants (or landlords) hope not to have to contemplate is what to do if a legal roadblock prevents the operation of the tenant’s business. In these situations, it is important to understand the circumstances under which the law will, and won’t, excuse performance. A Georgia landlord-tenant attorney can help you with these and other questions.

One case that involved a question of a tenant’s non-performance was a tanning salon that had rented a space from a commercial landlord in a southwest Florida shopping center. The lease called for a five-year term, scheduled to start in August 2013.

So far, this probably sounds like an ordinary transaction. However, at around the time the salon was scheduled to take possession, the city rejected a request from the salon to make certain changes to the property needed to run the tanning business. The city denied the request because, it claimed, the property was zoned with a designation of “C-4,” and tanning salons were not allowed in C-4 zoned properties.

Whenever you pursue a commercial litigation action, you’ll need to make several choices. It is important to make your decisions carefully because there are legal rules that prevent you from taking more than “one crack” at pursuing certain requests for relief. That’s because of the legal rule of res judicata, and it is just one example of why it pays to have knowledgeable Georgia business counsel representing you.

One example of when this rule mattered and limited a plaintiff’s ability to recover damages was a dispute between a franchisor and one of its franchisees. The Atlanta-based franchisee signed a 25-year franchise agreement with the Sugar Hill-based franchisor of child daycare centers in 2006. The contract had within it terms that called for franchisees to pay to the franchisor certain royalty and advertising fees. Just six years into the relationship, the franchisee announced that it was terminating its agreement with the franchisor. It took down all signs and anything else that bore the franchisor’s name. It also stopped paying advertising and royalty fees to the franchisor.

This lack of payment of fees led the franchisor to sue for the franchisee’s failure to perform under the agreement. Specifically, the franchisor sought fees and interest for the first two months of 2015. The franchisee, however, successfully defeated the franchisor’s efforts in both the trial court and the court of appeals. The key to the franchisee’s success was the two sides’ past litigation history. Shortly after the franchisee repudiated the contract, it also sued the franchisor for negligent misrepresentation and violation of federal franchise rules. In that case, the franchisor filed a counterclaim against the franchisee for its alleged breach of the agreement.

Legal matters can sometimes be like doing a construction job or a home renovation task. Achieving a successful result isn’t just about selecting a goal that you can achieve, but also about making sure that you are using the right tool to get the job completed correctly. In any commercial leasing situation, your lease agreement will give you certain rights. If you think that the other side has not lived up to its obligations under the lease, you may have a right to recovery in court, but, in addition to needing valid proof, you must be certain that you’ve chosen the correct avenue for seeking recovery. In other words, you have to be sure you’re using the right legal tool. If your commercial tenant sues you while using the wrong legal tool, you may be able to obtain a dismissal. A skilled Georgia commercial leasing attorney can provide invaluable advice and representation in your commercial lease-related litigation.

In June, the Georgia Supreme Court addressed such a situation in which a commercial tenant was displeased with an action taken by its landlord and sought assistance from the courts. A non-profit foundation headquartered in Glynn County rented space within a commercial property on St. Simons Island. In the fall of 2015, the landlord filed papers with the county zoning authorities, seeking rezoning of its property and requesting permission to build an addition onto the building in which the foundation rented space. The county approved both of the landlord’s requests six months later.

The foundation was not in favor of the rezoning or the addition that the landlord proposed. The foundation’s legal plan of attack to oppose the landlord’s actions was to go to court and ask the judge either to review the rezoning application and site plan, or else to issue a directive to the county to revoke its approval of the changes.

As a commercial landlord, you know that sometimes you may have problems with a tenant. The tenant may fail to pay rent on time occasionally or sometimes may fail to keep up the premises as required by the lease. You probably don’t anticipate your tenant making an error that burns the building down but, sometimes, that happens too. Protecting your business interests fully requires knowing how to engage the legal system in the right way to get back all of the losses you’ve suffered as a result of your tenant’s failure to comply with the lease agreement – whether those losses are moderate or massive. By having legal representation from a skilled Atlanta commercial landlord-tenant attorney, you can make sure you are prepared to protect your business interests, whatever that protection entails.

A situation like that (a fire inside a commercial rental property) actually occurred north of Atlanta… and ended up in litigation. The fire occurred in 2015 after the tenant, a franchisee of a national chain of hardware stores, received a shipment of pallets and plastic totes from the franchisor’s delivery truck. An employee of the tenant pushed the delivery far into the stockroom, which was situated in the corner of the building. Not long thereafter, the same employee noticed flames shooting out of one of the recently delivered totes. The fire spread, causing major damage to the store. The cost of the landlord’s loss was $116,000 and it wasn’t covered by insurance.

The landlord took the correct next step: it sued the tenant and the franchisor. The landlord asserted claims of negligence and breach of contract. The lease required the tenant “to keep the leased space in a habitable, safe, and good condition,” but the tenant failed to live up to that obligation, according to the landlord, by storing unsafe chemicals in the stockroom. Additionally, the tenant was negligent in accepting the chemicals (and the franchisor was negligent in delivering them,) according to the lawsuit.

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Whether you’re a small landlord with only a very few commercial tenants, or a very large one that has entered into hundreds of commercial leases, it is important to recognize that details matter, and even seemingly small details may matter a great deal. Even sections of your lease that seem like mere form language should not be taken lightly, as the language you include in (and exclude from) that contract may decide whether your tenant can or cannot legally escape complying with the agreement’s terms without penalty. To make sure you are getting the right agreement to protect your business interests, you should make sure you have the right Atlanta landlord-tenant attorney working for you throughout the process.

The worldwide COVID-19 pandemic shut down every state in the union this spring. The city of Atlanta established a stay-at-home order on March 24. The state issued its order on April 2.

This, of course, meant the closure of nearly all businesses to in-person traffic, a restriction that massively impaired the ability of some businesses to generate revenues. Some commercial tenants have worked with their landlords to address problems with meeting rent obligations, but others simply have stopped paying rent. The question you, as a landlord, may wonder is… are there any situations in which they can get away with this?

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GreenvilleOnline.com recently reported on the closure of several fast-food chicken restaurants in that area. The restaurant chain, headquartered in Atlanta, indicated that the 24 locations in Georgia and South Carolina were closed after the landlords of those properties evicted the fast-food tenants. Fortunately for Atlanta-area fans of the chain’s chicken, there are still many locations open in north Georgia. The sudden closure of these restaurants may lead one to wonder, though:  what is required for a landlord in Georgia to evict its commercial tenant? The reality is that there are multiple steps required by the law, and they must be carried out with precision to ensure that the court will grant the eviction order, which is why a Georgia commercial landlord should make sure to work with an experienced Georgia landlord-tenant attorney when it comes time to pursue an eviction.

Of course, the first thing that must happen for a landlord to seek an eviction is that the tenant must be in default. The commercial lease agreement between the landlord and tenant will typically state the actions or inactions that will lead to the tenant being in default. These can be things like non-payment of rent, late payment of rent, continuing to occupy the property after the end of the lease term, or using the property for a purpose expressly forbidden by the lease.

Once one or more of these things happens, the landlord must follow the rules laid out in the Georgia Code. First, the landlord must submit to the tenant a “demand for possession” letter. This letter informs the tenant that it is in default and that the landlord intends to begin legal proceedings to evict the tenant. That letter will also tell the tenant that it must vacate the property and return possession to the landlord.

As a commercial landlord, you have certain risks you face whenever a tenant’s lease comes to an end. One of these is that the tenant will not have maintained the property in accordance with the terms of the lease agreement. When that happens, you may need to litigate to recover damages for the harm you suffered. Whether your relationship with your tenant is a successful one or not, it pays to have experienced Georgia landlord-tenant counsel on your side to protect your interests.

One example of a relationship that did not end well was a pharmacy benefits management company’s lease of a “Class A-plus” space from a commercial landlord. The lease placed the obligation for many maintenance-related issues on the tenant. The two sides’ first dispute regarded the roof of the property. The landlord demanded installation of a two-ply roof, but the tenant instead sought to install a one-ply roof. A Florida court concluded that the landlord was entitled to reimbursement for the costs of the roof upgrade.

After the lease term expired, the landlord filed a second lawsuit, this one in federal court. The crux of the landlord’s federal case was that the tenant had returned the property in inferior condition. The landlord’s lawsuit listed 26 deficiencies, including problems with both the property and the equipment within it. The landlord argued that this was a breach of the lease agreement, which contained a paragraph that required the tenant to “at all times, at Tenant’s sole cost and expense, put, keep and maintain the Leased Premises (including, without limitation, the parking areas, roof, footings, foundations, interior and exterior walls and structural components of the Leased Premises) and the Equipment in a first class condition and order of repair.”