Articles Posted in Commercial Leases

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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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Published on: 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.

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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.”

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One of the types of provisions that you might negotiate to include in your commercial lease is an exclusivity term. Many commercial leases contain exclusive use clauses, particularly in situations in which the space is located in a larger shopping center that contains numerous tenants. What an exclusive use provision does for you, as a tenant, is allow you to use your leased space to operate your specific type of business (such as a clothing store, grocery store, electronics store, or restaurant) and to restrict or bar other tenants from operating a similar or identical type of business in that same shopping center.

Obtaining these provisions, and then making sure that they are enforced, can be vital for your business. The chances are that the calculations you made regarding whether or not a particular space’s lease terms made business sense for you included assumptions that you would have a certain zone where you were free from direct competition. If you end up facing competition within that zone, you aren’t getting the benefit of the bargain for which you negotiated. Effectively negotiating lease terms, and then aggressively working to enforce those terms, are areas where it pays to have experienced Georgia business counsel.

As an example, consider the federal litigation undertaken recently by a Florida-based supermarket that has several locations here in Georgia. The supermarket had negotiated and signed certain leases in Florida that included exclusivity provisions regarding groceries and pharmacies. The problem came after certain other stores, including a “closeout” retailer and a dollar store, opened locations in the same shopping centers and began selling food. This, according to the supermarket, was a violation of the exclusivity clause.

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As a creditor, your objective is to pursue any legal means allowable to obtain payment on the debt owed to you. Sometimes, those involved in the entity that owes you a debt may engage in improper activities to try to hide money or avoid paying you. As a judgment creditor, you need skilled and determined Georgia debt collection counsel on your side fighting for what’s duly owed to you.

A recent example of a judgment creditor that had to take multiple steps came from a dispute over an insolvent company’s large transfer of LLC funds. The insolvent LLC was an Atlanta area-based real estate business. The LLC’s managing member was also the individual who handled the LLC’s daily operations. In 2012, the insolvent LLC faced foreclosure on all of its assets. According to the judgment creditor, despite the LLC’s problematic financial condition, the managing member nevertheless authorized the company to make a $239,000 preferential payment…to the managing member. That transfer was a repayment of an unsecured loan that the managing member had previously made to the LLC.

In 2013, the LLC stopped making lease payments to the plaintiff, although the lease was not yet complete. This led the plaintiff to obtain a judgment against the LLC. Unable to collect from the insolvent LLC, the plaintiff took this additional step and went after the managing member for the payment he made to himself in 2012. The plaintiff’s argument was that, by making the preferential payment to himself while the LLC was insolvent, the managing member breached its fiduciary duty to it.

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