Commercial Evictions Surge
April 1, 2013
By: Christopher J. Charles, Esq.
Along with snow in the Valley and home-town favorite Phil Michelson’s third victory at the Phoenix Open, 2013 has also ushered in an increase in commercial lease defaults. Fortunately for landlords, however, Arizona law provides significant remedies for commercial landlords when a tenant defaults. Two examples are the non-judicial lockout and pre-judgment provisional remedies. Fortunately, these remedies are rarely needed because the mere threat of their use in the hands of a competent attorney generally accomplishes the landlord’s goals.
Unlike residential lease scenarios, a commercial landlord can evict its tenant without court action; indeed, in most cases a commercial landlord can perform a non-judicial lockout and effectively evict its tenant without a court order as long as the “lockout” does not breach the peace. This typically requires written notice to the tenant and extreme caution – although a lockout is generally quick and relatively painless, locking out a tenant from its business creates potential pitfalls and may expose the landlord to liability for wrongful attachment or trespass.
In addition, a commercial lockout is the death knell to any business. Thus, this remedy should be reserved for those cases where the landlord is convinced that there is no hope of salvaging the landlord/tenant relationship.
In addition to the lockout remedy, landlords also have excellent collection options thanks to Arizona’s provisional remedy statutes.
The American judicial system is the best in the world – but it isn’t perfect. One of its flaws is exposed by the delay that creditors encounter when seeking a judgment. For example, a creditor must typically wait six to twelve months before obtaining a judgment in a run-of-the-mill breach of contract action.
Commercial landlords, however, have the rare ability to attach a tenant’s assets immediately if the tenant breaches the lease. Indeed, Arizona’s provisional remedy statutes (A.R.S. §12-2401, et seq.) allow a creditor (such as a landlord) to immediately seize the debtor’s property “to assure that there will be a ‘pot of gold’ at the end of the litigation rainbow.” This remedy only applies in limited circumstances, such as the breach of an express contract for the payment of money. Fortunately for landlords, the failure to pay rent usually meets the provisional remedy statutes’ requirements.
This firm recently represented a commercial landlord with its claims against its tenant for nonpayment of rent. After sending the written notice of breach and demand for possession, the tenant peacefully vacated the property. But the tenant failed to pay the rent that was due. For six months the landlord graciously worked with the tenant to try and reach an agreement regarding the unpaid rent. The obstinate tenant, however, refused to pay.
As a result, this firm filed a lawsuit for breach of contract and concurrently filed an application for provisional remedies. Within days of filing the lawsuit, the court entered its provisional remedy order and allowed the landlord to immediately attach and garnish all non-exempt assets to satisfy the landlord’s anticipated damages in excess of $100,000.00.
Debtors generally come to their senses at this point and pay what is due (or at least stipulate to a judgment) – but not this tenant. Consequently, this firm orchestrated the execution of the writ of attachment by arranging for a locksmith, the Sheriff’s office (including members of the swat team with their shield and riot gear), and four professional movers, to forcefully enter the property and seize enough assets to satisfy the anticipated judgment. Approximately four hours later, the professional movers had seized all non-exempt property. The asset seizure ultimately led to a stipulated judgment and a favorable settlement.
Common courtesy and professionalism are indispensable virtues. But if a tenant cannot pay the rent and refuses the landlords’ reasonable requests, the landlord has powerful options to protect its financial interests.
For more Laying Down the Law articles, click here.
Christopher Charles is an experienced real estate lawyer and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS® (AAR). He is a Partner with the law firm Davis Miles McGuire Gardner, PLLC where he serves as the chair of the Real Estate Practice Group. Mr. Charles is an Arbitrator and Mediator for AAR regarding real estate disputes; in 2010, he was appointed to the State Bar of Arizona Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions.
Mr. Charles is a licensed real estate instructor and teaches continuing education classes at the Arizona School of Real Estate & Business. For a list of upcoming speaking engagements, please visit www.davismiles.com. Mr. Charles can be reached at email@example.com
Christopher’s company website: www.tbl-law.com