CORONAVIRUS UPDATE FOR COMMERCIAL TENANTS

When Is a California Commercial Property Considered Abandoned?

It is more common than one might imagine for a commercial tenant to pack up and leave the premises rather than negotiate with its landlord for lease termination. This is most often because the business owner/tenant is far behind in rent and doesn’t believe that there are any other options available. It is also most likely that, for whatever reason (whether a past history of conflict, landlord bureaucracy or tenant complacency), a lack of communication between landlord and tenant has contributed greatly to the problem. Whatever the reason, landlords and tenants should be careful about how they approach lease termination and abandonment.

rusted-neon-green-and-white-cafe-sign-1337952-m.jpgThe best way to avoid dealing with abandonment is to maintain open lines of communication. Business owners who better understand available alternatives are more likely to consider agreeing to a payment plan with respect to past due rent and/or voluntarily turning over possession of the premises to the landlord on some fixed date. Landlords are in turn better able to gauge the tenant’s position and ultimately to avoid costly litigation. Depending on the circumstances, landlords will often find that it makes more economic sense to agree to a lesser amount owed and to release the tenant from future obligations. It is surprising how often simple communication (even with lawyers involved) leads to a peaceful and voluntary turnover of possession. Better yet, in some cases, the parties are able to work out an arrangement that results in a continued tenancy.

While it seems sometimes lost on landlords, there is a significant benefit to retaining long time tenants with a proven track record. This is usually due to bureaucracy in this writer’s view. There are systems in place, and managers tend to let the systems control. For example, it is not uncommon for corporate landlord’s to serve three-day notices demanding rent and then to ignore tenant inquiries regarding the problem whether or not they actually intend to pursue eviction. The result is to encourage abandonment. This is not necessarily problematic for landlords. If the circumstances clearly warrant eviction as soon as possible, the cost of abandonment isn’t so great. However, even in the worst of scenarios, communication tends to reduce friction.

When Is a Property Considered Abandoned?

So when is a commercial property considered abandoned? This is an important question for landlords. First, the tenant must be at least 14 days behind in rent. Second, the landlord must have a reasonable belief that the tenant has abandoned the property. It may seem obvious in most cases: the tenant is closed for business; hasn’t been seen on the premises for more than a month and has stopped paying rent and communicating in any way. While intuitively this seems like clear abandonment, the law is a bit more complicated. There must be a demonstrated intent to abandon the premises taking all circumstances into account . The standard is one of a reasonable belief – such that a reasonable landlord would believe that there was an intent to abandon. In the above example, the property may not be considered abandoned if for instance after investigation, the landlord discovers that all of the tenant’s property remains and/or that utility bills are still being paid. Some facts that tend to show abandonment include accumulating mail and newspapers, disconnected utilities, no one answering the door, out of business signs and premises empty of personal property. In more obvious cases, a tenant might actually tell the landlord he is abandoning the premises.

Once a landlord has a reasonable belief that the tenant has abandoned the premises and the tenant is 14 days behind in rent, it must serve a notice of abandonment.  If the landlord locks the tenant out without first giving such notice, it will be guilty of self-help and wrongful eviction and be liable for any subsequent damages including possible punitive damages no matter how bad the actions of the tenant.  An abandonment notice must: be in writing and served on the tenant’s last known address(es); indicate that the property will be deemed abandoned pursuant to California Civil Code Section 1951.2 and the lease terminated unless the tenant provides written notice of its intent not to abandon before the date of termination; indicate the date of termination (15 days from the notice date if served personally and 18 days from the notice date if served by mail); indicate the landlord’s belief of abandonment and that the notice is being sent pursuant to California Civil Code Section 1951.3; identify the leased property; and state that rent has been due and unpaid for 14 consecutive day.   See California Civil Code Section 1951.3 for a sample Notice of Abandonment.                               

Contact an experienced San Diego commercial lease attorney for assistance.

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