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  1. #1
    Join Date
    Aug 2015
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    Default Should You Sue a Business That Breaks a Commercial Lease

    My question involves business law in the state of: California

    I rented out a property for a small business by signing a 5 year contract with them (with personal liability). The contract stated that contingency will automatically be removed 120 days after signing the contract. On the 120th day, the business requested a contingency extension claiming it needed more time to finish performing due diligence, but I refused.

    On the 135th day, a business representative stopped by my place giving me the property keys and saying the business is terminating the lease. I was surprised and threatened to sue them. Here is some additional information about the case:

    Good points that I can use in court against them:
    • the binding contract both parties signed
    • I started mitigating my losses as soon as the business gave me back the property keys: I've put the property for rent but I'm afraid it's going to take some time to rent it out


    Bad points that might be used against me:
    • while performing their due diligence, they discovered a problem with the property's building that was falsely advertised by me (disclaimer: the advertisement was done to the best of my knowledge) To try and fix it, they applied for a permit but the city didn't allow the changes which means the property can't be used to conduct their business
    • I didn't pay the real estate agent commission after the agreed on contingency-removal date. I admit it's a mistake but I needed the money when I knew the business might default on their lease


    My Question
    Should I consider suing them or suing is not worth the effort? What do landlords with similar issues usually do in my case?

    Thank you!

  2. #2
    Join Date
    Oct 2006
    Posts
    16,474

    Default Re: Is It Worth Suing a Business for Breaking the Lease Contract

    Quote Quoting towamp
    View Post
    My question involves business law in the state of: California

    I rented out a property for a small business by signing a 5 year contract with them (with personal liability). The contract stated that contingency will automatically be removed 120 days after signing the contract. On the 120th day, the business requested a contingency extension claiming it needed more time to finish performing due diligence, but I refused.

    On the 135th day, a business representative stopped by my place giving me the property keys and saying the business is terminating the lease. I was surprised and threatened to sue them. Here is some additional information about the case:

    Good points that I can use in court against them:
    • the binding contract both parties signed
    • I started mitigating my losses as soon as the business gave me back the property keys: I've put the property for rent but I'm afraid it's going to take some time to rent it out


    Bad points that might be used against me:
    • while performing their due diligence, they discovered a problem with the property's building that was falsely advertised by me (disclaimer: the advertisement was done to the best of my knowledge) To try and fix it, they applied for a permit but the city didn't allow the changes which means the property can't be used to conduct their business
    • I didn't pay the real estate agent commission after the agreed on contingency-removal date. I admit it's a mistake but I needed the money when I knew the business might default on their lease


    My Question
    Should I consider suing them or suing is not worth the effort? What do landlords with similar issues usually do in my case?

    Thank you!
    The bolded is going to hurt you badly.

  3. #3
    Join Date
    Aug 2015
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    3

    Default Re: Is It Worth Suing a Business for Breaking the Lease Contract

    Quote Quoting llworking
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    The bolded is going to hurt you badly.
    So you're suggesting I don't waste my time and money on a case that might be difficult to win? And thank you for your prompt response.

  4. #4
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    Mar 2013
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    18,340

    Default Re: Is It Worth Suing a Business for Breaking the Lease Contract

    Quote Quoting towamp
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    [while performing their due diligence, they discovered a problem with the property's building that was falsely advertised by me (disclaimer: the advertisement was done to the best of my knowledge) To try and fix it, they applied for a permit but the city didn't allow the changes which means the property can't be used to conduct their business
    Yep, that's the nail in your coffin.

    Not only will you be wasting your time and money with a lawsuit but it's possible for them to countersue for a full refund of anything they paid you. And they could win. Best to let sleeping dogs lie.

    Next time make sure your building is suitable for whoever rents it from you.

  5. #5
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    Aug 2015
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    3

    Default Re: Is It Worth Suing a Business for Breaking the Lease Contract

    @llworking, @adjusterjack

    My understanding is that the state of CA place the burden of due diligence onto the lessee? Shouldn’t he have done his due diligence within the required time before the lease went hard?

  6. #6
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    Mar 2013
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    Default Re: Is It Worth Suing a Business for Breaking the Lease Contract

    Quote Quoting towamp
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    @llworking, @adjusterjack

    My understanding is that the state of CA place the burden of due diligence onto the lessee? Shouldn’t he have done his due diligence within the required time before the lease went hard?
    I'm sure that the state of CA doesn't place any burden on anybody.

    It's contract law that does it.

    The answer to your question depends on a lot of things.

    What, exactly was wrong with the building?
    Why did it take the tenant so long to figure it out?
    Why, exactly, wouldn't the city allow the change or repair?
    Any documentation of the tenant's permit application and denial?
    What's the nature of the misrepresentation that you wrote of?
    There's probably a great deal more that would have to be examined along with the exact terms and conditions of your lease contract.

    You'll have to wait until you've re-rented to quantify your monetary loss.

    If the loss is within the CA small claims limit you can take a shot at suing without a lawyer. But if your loss is considerably higher you'd be wise to have an attorney review the situation and your contract.

  7. #7
    Join Date
    Jun 2015
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    988

    Default Re: Is It Worth Suing a Business for Breaking the Lease Contract

    Slightly alternate points....It is the written deal and the four corners of same that count.
    a mere ad that does not get into contract is of very limited weight on their side

    However, impossibility to use the premises for the intended purposes , if set forth in the contract , is one whopper point on their side of equation.

    However failure to complete all of this inside the 120 day limit tosses one big ball back on your side

    each of you might have God reason to reach a compromise

  8. #8
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    Mar 2013
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    Default Re: Is It Worth Suing a Business for Breaking the Lease Contract

    Quote Quoting HRinDEVON
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    each of you might have God reason to reach a compromise
    "God" reason?

  9. #9
    Join Date
    Sep 2005
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    Default Re: Is It Worth Suing a Business for Breaking the Lease Contract

    While the terms of a lease are generally going to govern, it's not the case that the lease magically erases prior acts of fraud and misrepresentation (intentional or not) that induce a tenant to sign a lease. It does not sound like this is a situation where the ad says one thing and the lease says another -- it sounds like this is a situation in which the ad, and subsequent representations by the landlord, induced the business to sign a lease contingent upon their obtaining some form of municipal approval consistent with the representations in the ad, with that approval unavailable because the situation was not as represented by the landlord. That's a foundation for a fraud claim, or for a claim of rescission based on mutual mistake.

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