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Commercial Leases

Commercial Leases:  Attention property managers and owners who lease to small businesses.   Commercial lease transactions from a litigation standpoint. 

There are a few simple steps that, if followed before signing the lease, should help save money and time, and increase collections, in the event of a breach of the lease.  

1.    Get financials, including lists of assets and values before signing the lease.  Get a realistic idea of whether the tenant or guarantor will be able to pay damages upon the breach of a lease, and what assets exist that might be subject to collection. 

2.    Get contact information.  It is easier, quicker, and cheaper to start a lawsuit against someone if you know where they live.  It is surprisingly common to be asked to file suit against someone and the only known address is the leased premises.

3.     Check on their contact information.  In King County, use "Parcel Viewer" to search for the address and determine who owns the property, what it's worth, etc.   Other counties have similar web search tools through the county assessor. 

4.   Get social security and a photo copy of their driver's license.  Again, this may help locate the defendants and their assets in the event of a breach.

5.    For tenants that are an LLC or corporation, check on the Secretary of State's website to see who the registered agent is, and check on their address.  If the leased premises is the service address for a registered agent, or if it is a UPS store location (or similar PO Box), make them change it. 

6.    Try to define a "Default" as a failure to pay any amount owed under the lease "when due" or "within five days of when due."  Try to avoid having to give written notice of non-payment before a default will occur.  If written notice is required, try to use email as a valid means of delivery to the tenant, or include language that says "Notwithstanding the foregoing, notice is sufficient if actually received by Tenant." 

7.    If you are leasing to a tenant who will be installing equipment or fixtures that you would like to remain if the tenant breaches the lease and is evicted or moves out, try to negotiate for a security interest in all of the tenant's property at the leased premises.  This comes up often in the case of a restaurant tenant.          

STANDARD DISCLAIMER STATEMENTS MADE IN THIS POST ARE MADE SOLELY TO INITIATE DIALOGUE AND INSPIRE YOUR INDEPENDENT INQUIRIES AND RESEARCH AND MAY NOT BE RELIED UPON AS LEGAL ADVICE. 

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