California Commercial Tenants Be Aware

 By Laurie Murphy

Laurie Murphy

Commercial tenants in California, unless the lease provides to the contrary, have no rights to offset from their rent payments, any amounts the landlord might otherwise owe the tenant for repairs for which the landlord was responsible but refused to make.

It has long been the law in this state and others that in residential tenancies, the landlord has the obligation to ensure that the premises are habitable when leased and to make any repairs that they are obligated to make to maintain the habitability of the premises.  If the landlord fails to do so, the tenant may, after giving notice to the landlord make the repairs himself and then deduct from the rent owed, the costs he incurred.  This is generally known as the "Repair and Deduct" rule.  (Civil Code section 1942).  Commercial tenants have no such rights. 

So, even if the landlord has the obligation under the lease to maintain the building and make necessary repairs, if the landlord fails to do so, no matter what harm befalls the tenant as a result of the landlord's refusal to repair or maintain, the tenant must still pay its rent.  If the tenant fails to do so and the landlord files an unlawful detainer action, the tenant will be evicted notwithstanding the fact that the landlord did not comply with its obligations under the lease.  The tenant's only recourse is to sue the landlord for breach of lease.   Unless the lease permits him to offset, he simply cannot do so without risking eviction. 


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The Perils Of Terminating A Lease Early

by Laurie Murphy

Most businesses, unless they own the property in which they operate their business lease the premises they conduct their businesses out of.  A commercial lease can be quite daunting to a small business owner and can go on for pages.  Most people simply look at the basic terms (how much the rent is and when it is due) and simply sign what is put in front of them.  And most tenants do not really understand the extent of their liability to the landlord if they leave the premises early – say if the business fails.  Unless the lease provides otherwise (and they never do) a landlord whose tenant has left before the lease term has expired is permitted to sue the tenant for the amount of future rent the tenant was required to pay under the lease less whatever the landlord collects from new tenant for that same period less other expenses associated with reletting the premises. 

The landlord is required to mitigate his damages by taking commercially reasonable steps after his tenant leaves to locate a new tenant.  In a market where rents are rising, a landlord might end up leasing the premises for more than the prior tenant paid and under certain scenarios the prior tenant may not end up owing the landlord anything.  In a declining or stable market that is never the case.  In addition, commercial landlords often will require a personal guaranty from the principal(s)/owner(s) of entity tenants.  In those circumstances the landlord can pursue not only the entity but the person who guarantied the lease unpaid rent.

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