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  1. #1
    Join Date
    Jan 2010
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    Default Commercial Lease Eviction - Can a Landlord Continue to Run the Business

    My question involves an eviction in the state of: PA

    A commercial tenant is evicted by sheriff via the "Order for Possession" for non-payment of rent.

    The Lease states that the Lessee grants to Landlord a security interest in all Lessee's goods and property in the premises and said interest shall secure the payment of all rent and charges collectible as rent.

    The lease also states that all rents become due and collectible in advance if Lessee defaults.

    1. Can Landlord collect all past rent and future rent due, even though the Lease is now terminated because of default and eviction?

    2. Can the Landlord sell all items and equipment in the property? How about the property of someone who was subletting the premises or working there on contracting basis.

    3. If the proceeds of sale don't cover all outstanding rent and fees, what options does Landlord have to recover the balance?

    4. Can Landlord continue to run the business herself under the same name or by registering it under a different name?

  2. #2
    Join Date
    Mar 2008
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    1,995

    Default Re: Commercial Lease Eviction-Can Landlord Continue to Run the Business

    Quote Quoting el2el
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    My question involves an eviction in the state of: PA

    A commercial tenant is evicted by sheriff via the "Order for Possession" for non-payment of rent.

    The Lease states that the Lessee grants to Landlord a security interest in all Lessee's goods and property in the premises and said interest shall secure the payment of all rent and charges collectible as rent.

    The lease also states that all rents become due and collectible in advance if Lessee defaults.

    1. Can Landlord collect all past rent and future rent due, even though the Lease is now terminated because of default and eviction?

    2. Can the Landlord sell all items and equipment in the property? How about the property of someone who was subletting the premises or working there on contracting basis.

    3. If the proceeds of sale don't cover all outstanding rent and fees, what options does Landlord have to recover the balance?

    4. Can Landlord continue to run the business herself under the same name or by registering it under a different name?
    Here's how I see it:

    1- Technically, rent is due for the entire term of the lease as you indicated in a default. So if it's a 3 year lease, you're in the middle of the second year, you are obligated for the remainder of the rent. usually, a LL can mitigate damages by re-renting, but you are on the hook till then.

    2- Currently, the lease as worded, you cannot take any equipment out, and once the LL obtained a judgment against you, he can certainly sell the property. As to the properties of other contractors, these contractors would then go after you.

    Now, some vendors with security inrerests in their goods or inventory might have done a UCC filing, and in those cases, the landlord cannot make a seizure. The reason for UCC filings is exactly for situations of this type, so if I was a bank, lent money, or leased equipment based on collateral, I wouldn't have my collateral seized by a LL for someone's non-payment of rent. In some cases, which I heard of, where banks failed to or neglected to do a filing, I have heard collateral had then been seized.

    3- If you personally guaranteed the lease, as most commercial leases are nowadays, then the landlord would come after you for the deficiency.

    4- Yes, I can't see why the landlord cannot run the business himself. My dad was a commercial landlord, a barber shop's lease was terminated for non-payment of rent, the contents of the store was taken, and my dad then rented out a "fully equipped" barber shop as he is not a barber, but there is no law that says that he cannot hire barbers to operate the shop as his own if he chose. The shop used a different name afterwards as there was no value to the name "Tony's Barber shop", and no value was assigned to it.

    The main point is, the LL can do with whatever he wants with the shop, which he owns, and he made no agreement with you that he cannot operate a business like yours.

  3. #3
    Join Date
    Jan 2010
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    4

    Default Re: Commercial Lease Eviction - Can a Landlord Continue to Run the Business

    SChinFChin,

    Thank you for your detailed reply.

    Do you think the LL can continue to run the business under the existing name or does it belong to Lessee. (The Lease has personal names only, and as far as I know, the Lessee was just DBA "XYZ")

    Is it wise to re-hire some of the employees and subcontractors that used to work in that business or best to start fresh?

    Also, if the Lease specifically excluded any subletting or anyone else using the premises to conduct business, and Lessee had contracted with others to bring their equipment in and share in profits, can their equipment be held/sold or does it have to be returned? And what proof do they have to provide that the items are theirs.

    Anyone else has answers, comments to the original post?

  4. #4
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    Default Re: Commercial Lease Eviction - Can a Landlord Continue to Run the Business

    What provision in the lease do you believe would give the landlord any right to the name of the business?

    If you're stating that you know that various items of property on the premises belong to third parties, that the tenant has no claim to them, and that your lease gives you no security interest in them, then they still belong to the third parties. What proof of ownership has been requested and/or offered?

  5. #5
    Join Date
    Jan 2010
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    4

    Default Re: Commercial Lease Eviction - Can a Landlord Continue to Run the Business

    Quote Quoting Mr. Knowitall
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    What provision in the lease do you believe would give the landlord any right to the name of the business?

    If you're stating that you know that various items of property on the premises belong to third parties, that the tenant has no claim to them, and that your lease gives you no security interest in them, then they still belong to the third parties. What proof of ownership has been requested and/or offered?
    The tenant is doing business as "XYZ".
    As far as I know, the tenant does not own the XYZ name nor has it been registered as XYZ Co., etc.
    Basically, John Doe, LLC, doing business as XYZ, but no legal entity as XYZ is in any way associated with tenant. Does this make any difference?

    Also requested proof and been offered an affidavit. Have no problem returning said items once proof of ownership (this affidavit) is furnished.
    Is there a particular form of proof that should be asked for?

    Should any other action (such as writ of execution) be taken to further secure the items or is it ok to just continue running the business (even under different name) without any further action?

    What happens if after couple of months the tenant comes back with the money to satisfy rent due, would the items have to be returned then?

  6. #6
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    Mar 2008
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    Default Re: Commercial Lease Eviction - Can a Landlord Continue to Run the Business

    Quote Quoting el2el
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    The tenant is doing business as "XYZ".
    As far as I know, the tenant does not own the XYZ name nor has it been registered as XYZ Co., etc.
    Basically, John Doe, LLC, doing business as XYZ, but no legal entity as XYZ is in any way associated with tenant. Does this make any difference?

    Also requested proof and been offered an affidavit. Have no problem returning said items once proof of ownership (this affidavit) is furnished.
    Is there a particular form of proof that should be asked for?

    Should any other action (such as writ of execution) be taken to further secure the items or is it ok to just continue running the business (even under different name) without any further action?

    What happens if after couple of months the tenant comes back with the money to satisfy rent due, would the items have to be returned then?
    From a practical as well as legal standpoint, NEVER use someone else's DBA would be the rule.

    I have purchased businesses from others, including the right to the DBA, but even so, my attorney advised me NOT to use the exact same DBA for liability reasons, particulary if the seller is in financial distress. The reason is someone can wind up suing ME for something someone else has done, or what someone else owes, like back taxes. I was advised if the DBA has some appeal, make a variation of it, and use that variation.

    I would conclude someone WANTING to use the DBA is remote, particularly if they consulted an attorney, who would advise against it.

    As to items belonging to the tenant personally, or others, I would be a good sport and return it. And if the tenant comes up with all the rent due, you certainly should return it all.

    As I mentioned, my dad had evicted more than one commercial tenant through the years. It is a truamatic for the tenants, and why make things even more miserable holding on to their personal belongings and others. The whole idea is to rerent the place quickly to someone with a more viable business.

    Remember, it's only business, and often, it just doesn't work out. And also, my dad has learned as a commercial LL, he has to make a judgment in many cases if a business sounds viable for the location.

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