In the fourth installment of “An Ounce of Prevention for the Commercial Landlord” series, Kevin J. Mahoney offers several more helpful hints in any lease relationship.
Execution of Leases
When a lease is entered into between the landlord and tenant, that lease should be fully executed. This means that all parties to the lease should sign the lease, their signatures should be witnesses and notarized and all relevant dates in the lease should be filled in. Furthermore, it is not uncommon for handwritten changes or deletions to be made to a lease. If this is done, all parties to the lease should initial those changes. Courts generally will not enforce such changes or deletions unless all parties have indicated their assent to the change.
Commercial leases routinely contain language which allows the landlord to exercise self-help in the event of a default. If the tenant doesn’t pay the rent, the lease may provide that the landlord can re-enter the premises, change the locks and put the tenant’s possessions out on the street. These provisions are classic examples of “saying it don’t make it so.” Just because a lease provides a landlord with broad self-help powers does not mean that the landlord is within its rights to exercise those powers. Generally, self-help is frowned upon in rent court. Rent court is set up in such a manner that landlords can have their case heard in a quick fashion so that monetary judgments may be entered and the premises restored to the landlord after a default. As a result, although self-help may be a faster route, it is generally a wiser course to proceed through the landlord/tenant actions through District Court so that any action the landlord ultimately takes has been sanctioned by the Court.
Document, Document, Document
Landlords can save themselves a tremendous amount of headaches by keeping thorough, detailed records of their accounts so that, when a delinquency occurs, the landlord can easily document and explain how he arrived at the amounts claimed. This need to document does not end at the entry of a judgment. Once the court has returned possession of the leased property to the landlord, the landlord needs to maintain detailed records of his attempts to relet the premises. Maryland appellate courts have said that a commercial landlord may choose to hold the tenant liable for the balance of the term of the lease. However, if the landlord does seek to relet the premises, he should make every effort to mitigate his damages by aggressively marketing the property and seeking a new tenant. Although a landlord may initially be tempted to pursue the balance of the rent from the original tenant, the landlord must consider the reality that a judgment against the original tenant may not be collectable. Furthermore, most landlords attempt to make every effort to avoid having empty rental properties. For these reasons, attempting to enforce the balance of the lease against the original tenant may not be the landlord’s best choice.
There is nothing landlords can do to guarantee that they will never have to deal with a defaulting tenant. However, by thoughtful drafting of lease agreements and thorough record keeping, landlords can minimize the chances that they will be victimized by a deadbeat tenant. Although a significant number of commercial leases are drafted by leasing agents and brokers, it can be prudent to have either a form lease prepared or individual leases reviewed by an attorney prior to the execution to ensure that the client is properly protected.