Expert: Jim Avancena, CPM - 3/26/2010

Question
QUESTION: I HAVE A COMMERCIAL LEASE WITH 18 MONTHS REMAINING.  THERE IS NO PERSONAL GUARANTEE.  THE LANDLORD ALREADY OFFERED A NEW LEASE, BUT WANTS TO DOUBLE THE RENT.  

I HAVE FOUND A NEW LOCATION IN THE SAME CITY AND WANT TO JUST WALK AWAY NOW AND REOPEN A THE SAME BUSINESS IN THE NEW LOCATION AS A NEW CORPORATION WITH DIFFERENT OWNERSHIP.

CAN THE LANDLORD COME AFTER ME OR THE NEW CORPORATION FOR THE REMAINING TERM OF THE LEASE.

THE EXISTING LOCATION WILL CLOSE WITH A $0 BANK BALANCE.

ANSWER: Edward:

You should expect that the landlord will do whatever is financially feasible to collect the rent and additional rent obligations per the terms of your current lease.  

You should check with an attorney regarding whether the law in your jurisdiction enables the landlord to successfully go far enough to get whatever assets are available to recover significant amounts of your remaining obligation.   The law regarding default and the means to collect a debt change depending upon the law in the area.

You did not say in which business form you signed for the existing lease.  Was that a corporation also, or other business form?   You should review the specific terms of your lease regarding who controls the fixtures and equipment in your existing location.   Perhaps this is not an issue because neither has any value to you, however, your landlord may call the local police if he believes you are removing items of value.  Do not expect the local police to become involved late at night or without a court order, however they are likely to simply order everyone to cease and desist until they have instruction from the court.

In many parts if the country a landlord can pierce the normal protections a business owner usually relies upon given certain circumstances.  An attorney will be able to advise you in that regard.

Be cautious and certain to know all the nuances of the germane law in your area.  I hope you don't reside in a part of this country where many still settle disputes via "Self-Help" rights and guns.

- Jim




   

---------- FOLLOW-UP ----------

QUESTION: THE BUSINESS IS AN INC. AND LOCATED IN NYC.

WITH MORE THAN 50% OF THE NEW CORPORATION NEW INVESTORS, AND THE NAME OF THE RESTAURANT OWNED BY A SEPARATE LLC AND LICENSED TO THE SPECIFIC LOCATION I THINK IT WILL BE HARD FOR THE LANDLORD TO COME AFTER US.

THANKS FOR THE ADVICE.

WE ARE GETTING LEGAL ADVICE FROM SEVERAL L%26T LAWYERS

EDWARD

Answer
Edward-

Ask your attorney for his advice in this regard; however, I suggest that if you have had any problems in your current location that suggest a default on the part of your landlord in providing certain services the lease requires it to provide; i.e., poor security, common area cleaning, parking problems, maintenance, lighting inside and out, etc., it may be wise to send it written correspondence of its default in the areas you delineate.  If there is any service or obligation that the landlord has not provided or met, and the consequences have been to your firm's detriment; for example, they/it have kept you from maximizing your revenue, I would certainly consider advising it of those matters in writing also.

Additionally, if you have any concerns regarding the accuracy of past charges prepared by the Landlord for reimbursable CAM costs, utility consumption, real estate tax, etc., etc. you may want to ask the landlord to provide you with photocopies of all of the supporting records that verify the accuracy of those charges.   Beware, your landlord will more than likely reject your request for copies of those records.

Review these suggestions with your attorney before proceeding.

-JIM