What options does a tenant who has broken a commercial lease have to avoid a default judgment?
My family owns commercial real estate that has been leased for the past 14 years by a buying prescription drugs online major restaurant chain. They have defaulted by not paying their monthly lease payment. We need to decide to either accept a buy out of the lease or go to court. The prospects or getting a new tenant now are slim, therefore we are leaning toward enforcing the current lease. But if we go to court, and win a judgment, can the tenant avoid payment anyway? If so, how? This chain no doubt has in-house attorneys so I am thinking they will use stall tactics etc. But our attorneys have reviewed the lease and say there is no wiggle room to get out it. The chain simply stopped payment on a check without prior notice or anything.
If you have attorneys, you should be consulting with them, not us bozos. If it were me, I’d probably sue to enforce the terms of the lease.
idk
the tenant has defaulted on the contract, seems to me a clear cut case
however, with the prospect of not being able to rent it you need to work out some kind of agreement
but you don’t want to let them continue their business without paying your for the privilege of the use of the property
The restaurant chain is playing a game. They know exactly what you know. Sure, you will win a judgment, but at what cost to you, in terms of attorney’s fees ? They’re making a buyout offer in the hopes that you will settle for same, realizing that you will end up with roughly the same amount of money either way. I’d opt for the buyout, unless it’s a very insufficient amount. Remember that, if you enforce the lease, you CAN’T lease the property to anyone else. As long as the chain pays you monthly after you win, the property is theirs to use. Analyze the net results from both approaches. A worthwhile effort would be an attempt to negotiate the buyout price upwards.
If it is a chain restaurant, and they are not in bankruptcy, I’d hold them to the lease. (Mostly since it is a hard time to re-rent.)
What do your lawyer and tax accountant think? (Lost rent is deductible, if that is any help.)
take the buy out of the lease. get yourself an attorney to negotiate it. you will be put on hold by them stalling and suing for damages on top of rent is going to be VERY hard and take a lot of years. the only way they can avoid a jdg if you do go to court is to file bankruptcy or just ignore you and not pay (7 years of avoiding you and the debt is off the business credit report). you need to consult an attorney but buy out is the fastest cheapest way to get this done. some attorneys will do flat fee negotiations for you just get an experienced real estate attorney
Hmmn. Sounds like some serious brinkmanship is going on here.
I sense they want to stay where they are but at a reduced rate of rent.
If the restaurant was losing money, then the owners would shut it down and offer you a buyout. If it is still open, then it may be profitable but not profitable enough.
Your family seriously needs to sit down and decide what it can live with. If you accept this buyout or any buyout and the place sits vacant for who knows how long, then you could end up losing more money than if you negotiated a lower rent.
In this economy things have changed for the worse. When that lease was signed, the restaurant owners signed with the idea in mind our economy would not slack back into a recession. Things have changed and they want a better deal.
Think long view here. Think outside of the box here. What do you and yours want this property to do over the long run. I sense you don’t want an empty building. I also sense you don’t want to cut your throats either. Short term thinking always produces short term results.