Our commercial tenant stopped paying rent and closed the store this morning.

[Krel234]

Our tenant is a grocery store halfway across the country. The owner has been struggling lately, but has always paid his rent -- until recently. He's now behind 1 1/2 months. We called him two days ago and he only said that he's having a sale in the store to make money, and will talk with his accountant to discuss his options. We tried calling him today. This morning the lady answering the phone said he's out but would be back later this morning. He never answered the phone after that. We called many times, and then got suspicious and called a nearby business, who said that he's closing the store. His sale is 50% off on everything in the store, and he left a note on the store says he's closing.
We've tried reaching him at home (left two messages) but he's not returning our calls. He has a 5 year lease, with 1 1/2 years remaining. What are our options? Thanks for any input you can provide.

[Gold River]

Hi,

    Is he incorporated or doing business as? If he's incorporated and your lease is with the corporation you can hope by selling everything at 50% he is able to actually pay all the companies debt's or a large percentage of the debt (80 cents on the dollar) to all the creditors and close! By law he is required to pay all creditors partially or off completely before distributing left over money back to the legal owners!

If he is a "personal" business with no corporate protections he could pocket everything in cash and declare bankruptcy at some point voiding all potential for creditors to recieve anything! However as a personal business he may have to many assets to declare bankruptcy and may come back and try to negotiate cash settlements or make payment arrangements to clear his obligations over time!

You can serve a legal notice to him to pay his lease agreement or quit and he is obligated to pay all the lease until you can re-lease the property or unit to a new tenant! In most cases if he's able and probable in your best interests to get him out quickly and start marketing it for lease, when you re-lease it you'll then have to determine his legal obligation and most of us who own commercial space find it easier to negotiate some percentage of what he owes rather than to take it to court!

In the trying economic times were in it's likely this person tried their best to save their business and our current econemy is the real culprit!

Good luck,

 
                  GR

[Krel234]

Thanks for your informed input, Gold River -- we really appreciate it. Our tenant is an LLC. We'll try reaching him again to work something out, and failing that, we'll do as you suggest -- serve him a legal notice to get him out.

We're reeling right now -- this was our first commercial investment. It's a big, well-established grocery store that's been in that location for a long time. It seemed to make sense at the time -- we figured people would always need to eat, even in a recession.

Again, thanks for your help.