Preserving your rights as a Commercial Landlord
It’s the second of the month and your tenant still has not paid rent. Or, a few months have gone by without a payment and you are not sure how to recover arrears. Either way, there are a few steps that you can take as a commercial landlord to preserve your right to enforcement, and give yourself the best chance to recuperate what is owed to you under the lease. Following these steps could be the difference between collecting most or all arrears, and forever waving goodbye to this lost rent.
1. Deliver formal notice in writing. A good commercial lease agreement will set out precisely how notices of default are to be delivered, and landlords should be careful to follow these notice instructions. Even if the lease is silent on default notices and cure periods, it is good practice to be able to prove that you have provided the tenant sufficient notice of default, in the event you want to take further enforcement proceedings (such as termination, distraint, or suing for arrears).
2. Decide what you want to do. Generally speaking,Alberta law provides landlords with five primary enforcement options if a tenant fails to pay rent. In addition to considering the particular terms of your lease, assessing which remedy is most appropriate for you will depend largely on whether you want to keep the lease in effect, or terminate and evict the tenant.
Remedies keeping the lease intact:
- Sue the Tenant for arrears only (and all rent that continues to accrue up to the time of the judgment), while keeping the lease active; or
- Distrain the tenant’s property and recover arrears; or
- Re-enter and re-let the leased premises on the Tenant’s account.
Remedies requiring termination of the lease:
- Terminate the lease, evict the tenant and sue for amounts owing under the lease that have accrued to the date of termination only; or
- Terminate the lease with the proper notice and sue for arrears and amounts accrued under the lease as well as damages for the loss of the benefit of the unexpired term of the lease.
Each of these remedies requires a careful consideration of your goals for the premises, the relationship with the tenant, and the particular terms of the lease. In addition, each remedy has specific formal and substantive requirements that you should follow, if you want to execute the remedy correctly. For example, if you change the locks to the premises, it’s possible that you will be deemed to have terminated the lease, thereby precluding potential other remedies, notwithstanding the fact that you did not intend to terminate. Therefore, it is important to consult with a lawyer and explore your options to ensure that you do not unintentionally limit your available remedies.
3. Follow through to resolution. Often, after being threatened with eviction, tenants will attempt to negotiate for rent relief or another alternative payment arrangement, so they can continue to occupy the premises. If a resolution is reached, it is important in these cases that you, as a landlord, formalize the arrangement in writing as an amendment to the lease. This way, all parties are aware of the arrangement moving forward, and you reserve the right to enforcement under the lease if the alternative arrangement is breached. Good counsel will be able to quickly and simply draft up the amendment to ensure all remedies are preserved.