March 2016 — Like a farmer, a property manager needs to tend to his or her tenants to maintain and improve the building’s financial yield. Unfortunately, sometimes the farmer needs to do some weeding.
Much of the burden of the legal procedure of terminating a lease and evicting a tenant falls on the owner. The process, if done incorrectly, can result in a troublesome, irate tenant retaining possession of the premises, in addition to possible lawsuits. Evictions are not in the realm of do-it-yourself law. Eviction laws differ by jurisdiction, and the property manager should speak with an attorney to learn more. The proper procedure for giving legal notices, as well as how to manage an eviction, should be part of your building procedure manual. Make sure, however, that the policy does not conflict with notice procedures set forth in various tenant leases.
Grounds for Eviction
One of the clauses in a lease, often called the default clause, enumerates the various reasons a tenant can lose its rights to the premises. The clause should detail how a tenant can go into default and how the owner can terminate the lease. Be aware that, when given notice by the landlord (owner or property manager) of intent to terminate, the tenant has several options to remedy the default and remain in the building. These options are similarly outlined in the lease, including, for example, the option to pay all back rent due on the space.
The usual reasons for default are as follows:
- Nonpayment of rent or of additional rent
- Breaking any of the terms, conditions, or covenants of the lease
- Tenant or guarantor of the lease becoming insolvent or filing for bankruptcy
- A trustee being appointed over the tenant’s property
- Abandonment
- Failure to occupy the premises after the lease is signed
- Death of tenant or guarantor (usually if it’s a sole proprietorship)
The Five Stages of an Eviction
An eviction can be broken down into the following five basic stages:
- Tenant goes into default by breaking one or more clauses in the lease.
- Owner gives tenant legal notice of default in accordance with the provisions of the lease (or applicable eviction law).
- Tenant fails to correct (or cure) default after receiving notice, providing such cure rights are available to the tenant under the lease.
- Owner seeks legal judgment against tenant returning premises to owner. By this time, most problem tenants have moved out.
- If tenant refuses to move, owner recovers the premises with a court order and has the tenant and property physically removed.
The Eviction Process
The eviction process usually begins at stage two, with the property manager giving the tenant written default notice. A copy is also given to the owner’s attorney. When there is no cure by the time of the deadline, and the tenant has not moved out, then the owner’s attorney takes the copy of the notice to court and seeks a legal order returning possession of the premises to the owner.
It is important to know who should be served with any legal papers; most leases state who is to accept service for the tenant, and who accepts for the landlord. In addition, the lease also states the office address for each party where service can be made. Depending on the law, these types of notices can be served in person or by mail.
Before a judge will give any order of possession, a hearing is customarily scheduled (which could be days or weeks hence, depending on the court calendar). Next, the owner’s attorney must send the tenant a notice of the requirement to appear in court, called a summons, which must be served in a specific prescribed legal manner. Attached to the summons is another document, called a complaint, that details the legal issues for the action. At this point, many tenants may move out, making the need for a hearing a moot point.
Even if the tenant moves out, you must complete the eviction process. By doing so you:
- Protect against a tenant’s claim that it intended to remain in the space.
- Obtain legal authorization to remove any items left behind.
- Have the opportunity to pursue a money judgment.
The tenant may decide to contest the eviction, which requires him or her to show up on the date set by a court clerk. Once a court date is set, either party may seek adjournments, which may delay resolution of the matter for weeks or months. Depending on the complexity of the situation, or the truculence of the tenant, there may be pretrial motions for discovery (seeking out the facts by going through your business records), which may include depositions of you or your staff. Your attorney may do the same to the tenant.
What to Do after Obtaining an Order of Possession
It’s your day in court, and the judge issues an order of possession. Now what do you do?
- If the tenant has moved out, you may re-rent the space.
- If the tenant has moved out and left property, follow state law regarding disposal of abandoned property.
- If the tenant refuses to leave, get a court order and have the appropriate law enforcement agency physically remove the tenant and its property.
Tenant Move-Out
The tenant will need to follow the building’s rules when moving out. Such rules may govern the times when the tenant can use the freight elevator and loading dock. If the move takes place after hours, then the tenant may be required to pay a surcharge for building staff to be on hand to assist or supervise the move.
The property manager or designee should inspect the space before and after the move to check for damage. Photograph any holes, rips, and other damage. These pictures may come in handy when substantiating repair charges against the security deposit. Make sure to get all the keys from the tenant, even though it is not critical to do so. As part of the move-out procedure, you should have the lock cylinders to the space removed and rekeyed as a security measure.
Abandoned Property
In the event the tenant leaves property behind, don’t throw it out before investigating the laws and the lease provisions regarding disposing of a tenant’s belongings.
Certain laws govern the disposition of abandoned property, and the former tenant could sue you if you don’t follow them. In New York state, for example, an owner must obtain permission from the state comptroller before getting rid of the tenant’s property.
Depending on the jurisdiction, the laws stipulate certain procedures that generally require you to make a written inventory of the property, along with giving proper notice to the former tenant of how and where he or she can obtain the belongings. The property must also be stored until it can be disposed of. If the tenant does not claim it within a stipulated time period, then the property must be sold if it is over a certain value.
Before a sale can be held, a public notice ad must be placed in a newspaper to announce the sale. Proceeds from the sale may have to be deposited with a government agency (minus the owner’s storage and advertising costs) for a set period of time. In some jurisdictions, if the tenant fails to claim the proceeds from the sale after a year or so, the governmental agency holding the funds gets to keep them.
This article is adapted from BOMI International’s course Leasing and Marketing for Property Managers, part of the RPA designation program. More information regarding this course or the new High-Performance certificate courses is available by calling 1-800-235-2664. Visit BOMI International’s website, www.bomi.org.