Property Managers, Commercial Tenants and Evictions
Your commercial tenant failed to pay rent. You have heard that things are not going very well for them, but now it is apparent. As a property manager your duty and obligation is to resolve the issue as quickly as possible.
When the tenant failed to pay by the due date they have effectively breached the lease and you are entitled to evict the tenant from the property. An eviction lawsuit commonly called an Unlawful Detainer action is a fairly straightforward legal process. The important thing for property managers to know is that the steps involved in this process are critical and must be followed to the letter of the law.
A real estate attorney representing both parties in the action is common. If your property manager has followed the law, given proper notice, and has a detailed file of all of the correspondence between the tenant and their company the unlawful detainer action should go fairly smoothly and the landlord or owner should prevail.
The First Step Is To Resolve Rent Payment Issue If Possible
If at all possible the property manager should make every effort to get the tenant to make the rent payments and bring their lease current. If this involves waiting a few extra days for payment maybe this would be the best course of action instead of filing a lawsuit. Your individual company policies and best practices will dictate this action, but it would be better for all parties to resolve before litigation.
Three-Day Notice Drafted
If a payment is not forthcoming then a ‘three-day notice to pay or quit’ must be prepared and properly served on the tenant. This notice must be in a specific legal format. A commercial owner, landlord or property manager can choose between different types of 3-day notices; 1) specifies the precise amount of rent owed; or 2) estimates the amount of rent owed – usually when a tenant is paying a percentage rent.
If the lease requires the tenant to pay rent and other separate amounts for triple net or CAM charges, the property manager should get the proper advice on whether or not two separate and distinct notices are required to be served. For example, if the property manager or landlord accepts an overpayment of the rent because they have miscalculated and the tenant overpaid estimated rents and CAM charges this may lead to a tenant victory in the unlawful detainer action. This would also possibly give the tenant the right to attorneys’ fees. It is critical to be correct in this step.
The Three-Day Notice Must Be Properly and Legally Served
The tenant is deemed served when they are personally served with the three-day notice, or a responsible person at the place of business is personally served on the premises. In the event no one is available the landlord or property manager can attach the notice to the front entry door of the business premises while simultaneously sending a copy of the three-day notice by certified mail return receipt requested. The landlord or property manager must then prepare a ‘proof of service’ in the proper format which states in pertinent part that the ‘three-day notice’ was served on the tenant, or describe the method of service.
The Property Manager or Landlord Has a Three Day Waiting Period Required for Service to be Effective
After properly serving the three-day notice a three day waiting period begins on the next business day. If the third day falls on a weekend or holiday the three day waiting period is extended to the next business day.
If the tenant decides to pay all rent due at this point or corrects any outstanding violation of the lease terms then the eviction process ceases. If the tenant makes partial payment the landlord or property manager can accept partial payment but must notify the tenant that they are not waiving their rights to proceed with an eviction.
In the event that the tenant has violated the lease by way of some criminal act or conduct then the eviction process continues.
At the end of the three day waiting period the landlord or property manager may go forward with filing and serving a complaint and summons.
Summons and Complaint are Prepared and Served
In the event that the tenant has failed to cure their outstanding rent violation, or failed to cure any other violation that they have been property notified of, then the landlord or property manager may proceed with filing and serving the summons and complaint to the tenant. A third party not involved with the action, typically a registered process server can be hired for a fee to serve the papers on the tenant. The summons, complaint and proof of service must then be filed with the court clerk’s office together with a copy of the lease, and then property served three-day notice and its proof of service.
Technical Mistakes Can Cause Delays
If the landlord or property manager has taken this process on by themselves there is a possibility that they have made a technical error in the processing, preparing, serving, and filing these documents. There are several technical areas of the law which must be followed or will result is substantial delays if they are not. A tenant who hires an attorney will likely find these technical errors, if the court doesn’t find the errors. This will likely result in delays which means money to the property owner. The best course of action in these situations is to hire an eviction attorney to help prevent delays and additional costs for the owner.
Court Proceedings Require that All Parties Appear in Front of a Judge.
If the tenant does not contest the eviction
A properly served tenant has five days to oppose the eviction. If substituted service was used then the tenant would have fifteen days to file a responsive pleading to the action. If the tenant fails to oppose the eviction the landlord or property manager will seek a default judgment of possession of the premises. This will most likely be granted and the case will be referred to the Sheriff’s office for tenant lockout (see below).
If the tenant contests the eviction
In the event the tenant hires an attorney and contests the eviction then things will take a while longer. The tenant will be granted more time to prepare and there will be approximately thirty-day period in which a trial will be set. If the landlord wins then the tenant will have to pay the rent and other losses most likely including attorneys’ fees. If the tenant wins the landlord may have to pay attorneys’ fees. In this situation a property manager really needs to be represented by counsel.
The Landlord or Property Manager has the Right to Lock Out the Tenant
Assuming a landlord victory the county sheriff will post a ‘Five-Day Notice to Vacate’ the premises on the tenant’s door or entry into the business. On the sixth day the sheriff meets the landlord or property manager at the property. The landlord or property manager then receives a receipt of possession of the property. If the tenant is still there when the sheriff arrives, the sheriff will then physically remove the tenant. The landlord or property manager will now have a locksmith come and change the locks to keep the tenant out.
Notice to Claim Property
If the tenant leaves behind personal property there are state statutes that deal with this specific issue. The landlord or property manager must give the tenant fifteen days after the lockout period to claim any possessions from the property, or if the tenant left before the lockout, eighteen (18) days after the mailing of the “notice of belief of abandonment” to the tenant’s last known address. The notice must describe the property with specificity so the tenant can identify it, and the notice must also describe the storage costs. A prudent practice for a landlord or property manager would be to photograph and log all of the tenants’ belongings so that there was not a later dispute.
It is not legal for a landlord or property manager to hold a tenant’s personal property as security for payment of money awarded by a court judgment.
Unclaimed Property Disposed of or Sold
When the fifteen day waiting period is over the landlord or property manager can dispose of the tenant’s personal property if it is worth less than $750 or $1.00 per square foot, whichever is greater. If the property is worth more the landlord or property manager must auction it through a public sale held after properly published notice with the proceeds turned over to the county, minus expenses.
Although this article has briefly touched upon this process one should see that this is not a simple process, but is a process which should be taken seriously and professionally. It is always a best practice to have an eviction attorney help a landlord and/or a property manager through this process.
David Roberson, Esq.
David currently is the broker/owner of Silicon Valley Property Management Group (SVPMG) which manages 150+ client properties on the San Francisco Peninsula.Trust, transparency, and performance guarantees are the foundation of SVPMG. David challenges anyone to find a PM company that offers services similar to the extensive education, customer service, and performance guarantees provided by SVPMG.
David also provides consulting for his clients on property development feasibility, construction, and complex real estate transactions.
David has authored a published law review article, two real estate books, and over 120 real estate blog articles.
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