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Maybe, But It Depends Upon the State in Which the Property Is
The COVID-19 pandemic caused unprecedented financial damage to
the commercial real estate sector. Commercial landlords were forced
to make difficult decisions, including whether to accept rent
abatements, payment deferrals, delayed tenant buildouts, lease
renegotiations or other means of achieving a commercially
reasonable outcome. Many landlords, however, either had no choice
or opted to pursue formal eviction proceedings – against
those tenants including small businesses, restaurants, bars, etc.,
that suffered financially during the pandemic and defaulted on
their leases – to retake possession of their premises or
recover what they could in unpaid rent and other leasehold
financial obligations such as taxes and water. In less frequent
circumstances, some landlords took matters into their own hands by
avoiding court intervention and exercising self-help tactics such
as placing locks or chains on doors, changing locks or deactivating
keycards to evict their tenants in default.
For landlords operating in multiple states, hiring a law firm
that knows the nuances of when self-help is permitted is essential
for efficient lease negotiations and enforcement. And just because
a lease purports to allow self-help evictions does not mean a court
will enforce that provision. This blog highlights, by example, the
various ways in which states address the use of self-help by a
commercial landlord upon a tenant’s default.
Under Florida law, commercial landlords are prohibited from
taking matters into their own hands. The court in Palm
Beach Fla. Hotel v. Nantucket Enterprises, Inc., 211 So. 3d 42
(Fla. 4th DCA 2016), citing Florida Statutes, Section 83.20,
recognized that the “only” methods a landlord can utilize
to retake possession of its premises from a tenant in default are
by: 1) court order granting possession to the landlord; 2) when the
tenant surrenders the premises to the landlord; or 3) when the
tenant abandons the leasehold. Significantly, the Court
in Palm Beach Fla. Hotel affirmed the trial
court’s award of $8.8 million in favor of the tenant after
determining that the landlord – who did not comply with the
above-referenced statutorily enumerated methods – had
wrongfully evicted the tenant notwithstanding that the operative
lease authorized the landlord to exercise self-help in the event of
the tenant’s default.
In Texas, a commercial landlord is prohibited from, among other
things, interrupting a defaulting tenant’s utilities, removing
doors or windows, and removing a tenant’s furniture, fixtures
or appliances. Tex. Prop. Code, Section 93.002
(a)-(c). However, the landlord is permitted to prevent a tenant
from entering the leased premises without judicial process by
“changing the door locks of a tenant who is delinquent in
paying at least part of the rent.” Tex. Prop.
Code, Section 93.002(c)(3). In other words, while a commercial
landlord cannot utilize self-help if a tenant fails to comply with
its non-monetary obligations, it does have the right to limit a
defaulting tenant’s entry into the leased premises by changing
the door locks, provided the landlord places “a written notice
on the tenant’s front door stating the name and the address or
telephone number of the individual or company from which the new
key may be obtained … [t]he new key is required to be
provided only during the tenant’s regular business hours and
only if the tenant pays the delinquent rent.” Tex.
Prop. Code, Section 93.002(f). Importantly, if a commercial
landlord fails to comply with Section 93.002(g), the tenant may be
entitled to recover possession of the premises, terminate the lease
and pursue damages from the landlord.
Under Georgia law, “a
landlord may contract to avoid [the statutory
notice and other requirements of dispossessory proceedings set
forth in O.C.G.A. Section 44-7-50 et seq.] when renting property
which is not to be used as a dwelling-place.”
See Rucker v. Wynn, 212 Ga.App. 69, 70 (1994).
In Rucker, the Court determined that a default
provision contained in the parties’ commercial lease agreement
entitled the landlord to change the locks on the doors and reenter
and take possession of the property upon the tenant’s
nonpayment of rent – provided “this can be accomplished
without a breach of the peace” – without notice or
resort to legal proceedings to allow the landlord to re-lease the
premises. See id. at 71. While the parties to a commercial lease
are free to negotiate the parties’ respective remedies in the
event of a breach, including the right to exercise self-help,
Georgia law does not expressly permit or prohibit the use of
self-help by a commercial landlord seeking to repossess the
premises upon a tenant’s default.
In Oregon, in the event of a breach of the lease by a commercial
tenant, the landlord can utilize self-help and change the locks to
retake the premises only if the lease permits it and the landlord
undertakes the eviction “in a peaceable manner and without
force.” O.R.S. Section 105.105; see also Jordan v.
Wilhelm, 770 P.2d 74 (1989), rev den, 308 Or. 79 (1989)
(affirming judgment for the defendant landlord in a conversion
action that locked the plaintiff tenant out of its office).
For commercial landlords, deciding whether or not to move
forward with formal eviction proceedings can be unappealing and
even frustrating. However, if you are commercial landlord
contemplating the use of self-help rather than formal litigation,
it is imperative that you understand whether the applicable law
permits such a remedy. Even if the applicable state law allows a
landlord to utilize self-help, either by statute or pursuant to the
terms of the lease, make sure to comply with any rules that govern
the manner in which self-help is carried out. And the commercial
landlord must always be aware that even if self-help is
permissible, such an action carries risk and may not always be the
best course of action, as it may expose the landlord to damages for
unlawful eviction, trespass, conversion and other possible causes
of action by the tenant.
With 27 offices throughout the United States, Holland &
Knight’s real estate litigation attorneys have the experience
and resources to help commercial landlords who are considering the
eviction of tenants in default.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.