What Happens When Your Commercial Tenant Stops Paying Their Rent?

Your commercial property investment should be an asset that helps you build wealth, but when your tenant fails to pay rent, it can turn into a source of aggravation and expense. Nonpayment of rent is a common cause of disputes between landlords and their tenants, and you have the right to enforce the terms of your rental agreement if your tenants are not meeting their obligations. Our advice is to always try to resolve issues with your tenant first through communication and negotiation. Although sometimes you may feel there is no other solution and need to try to evict your tenant, be advised that, in California, it is not always easy to evict the tenant successfully. California law spells out proper steps to take and you must observe these to preserve your rights and avoid legal delays.

What Governs Commercial Property Tenancy?

The rules governing commercial property tenancy are different from those regarding residential properties. In general, basic contract law applies here, which means you should first consult your rental or lease agreement to determine the exact tenancy terms that have been agreed on. Ideally, this document will clearly lay out the specifics of when rent is due and what will happen if it is not paid in a timely manner. Under California law, a commercial landlord is not required to provide a grace period before imposing fines for late payment or initiating termination of the tenancy contract, but you should check your agreement to ensure that you are following its terms precisely rather than making assumptions that may prove incorrect.

What Are the Steps for Seeking Eviction for Nonpayment?

Typically, a commercial renter can be served with a 3-day notice to pay or quit after they have failed to pay rent and any grace period, if provided, has passed. This notice warns them that they have only three days (excluding weekends and judicial holidays) to either pay the back rent they owe or move out of (quit) your property. To be legally valid, however, the notice must include specific information:

• Full name of the tenant(s), including any subtenant(s)
• The legal address of the rental property
• The correct amount of rent due
• The date the tenant was served with the notice
• A clear statement that the full amount must be paid or they must move out within 3 days
• Details about how rent should be paid

Omitting any of the required details could allow your tenant to delay eviction proceedings in court on a technicality, so you must ensure the accuracy of the notice before delivering it to, or having it served on, your tenant.

If your tenants pay the full amount owed within the provided three days, you are required to accept payment and halt any eviction proceedings. If, however, they do not, you need to be prepared to follow up promptly with an unlawful detainer action in the proper court. Since an unlawful detainer action requires comprehensive legal analysis of the facts, the lease, and issues on both the tenant and landlord side, it is imperative that an attorney prepare the action.

The tenant has only five days to respond after they’ve been lawfully served with the unlawful detainer notice (again, not including Saturdays, Sundays, or court holidays). If they respond to or contest the eviction notice, a hearing is likely to be scheduled in court in a relatively short period of time. Being prepared with an expert attorney representing you will give you the best chance to make your case successful without additional expensive delays.

Protecting Your Rights and Your Investment

When your commercial tenant fails to pay, taking the wrong steps can make it more difficult and costly to evict them. The real estate attorneys at Ghassemian Law Group can provide the knowledgeable support and assertive representation you need to resolve the matter as quickly as possible. We can also review your commercial lease agreements to ensure that your contracts are providing the protection and clarity necessary to minimize your exposure to risk. To learn more about how our experienced real estate team can help you, contact us to schedule a consultation today.