Along with snow in the Valley and home town favorite Phil Mickelson’s third victory at the Phoenix Open, 2013 has also ushered in an increase in commercial lease defaults. Fortunately for landlords, however, Arizona law provides significant remedies for commercial landlords when a tenant defaults. Two examples are the non-judicial lockout, and the pre-judgment provisional remedies. Luckily, these remedies are rarely needed, inasmuch as the mere threat of their use in the hands of a competent attorney, generally accomplishes the landlord’s goals.
Unlike residential lease scenarios, a commercial landlord can evict its tenant without court action; indeed, in most cases a commercial landlord can perform a non-judicial lockout and effectively evict its tenant without a court order, as long as the “lockout” does not breach the peace. This typically requires written notice to the tenant and extreme caution – although a lockout is generally quick and relatively painless, the locking out of a tenant from its business creates potential pitfalls for the landlord, and may expose the landlord to liability for wrongful attachment or trespass.
In addition, a commercial lockout is the death knell to any business. Thus, this remedy should be reserved for those cases where the landlord is convinced that there is no hope of salvaging the landlord/tenant relationship.
Along with the lockout remedy, commercial landlords also have excellent collection opportunities, thanks to Arizona’s provisional remedy statutes.
The American judicial system is the best in the world – but it is not perfect. One of its flaws is exposed by the delay that creditors encounter when seeking a judgment. For example, a creditor must typically wait six-to-twelve months, prior to obtaining a judgment in a “run-of-the-mill” breach of contract action.
Commercial landlords, however, have the rare ability to attach a tenant’s assets immediately, if the tenant breaches the commercial lease. Indeed, Arizona’s provisional remedy statutes (A.R.S. §12-2401, et seq.) allow a creditor (such as a landlord) to immediately seize the debtor’s property, “to assure that there will be a ‘pot of gold’ at the end of the litigation rainbow.” This remedy only applies in limited circumstances, such as the breach of an express contract for the payment of money. Fortuitously for landlords, the failure of a commercial tenant to pay rent, usually meets the requirements set forth in Arizona’s provisional remedy statutes.
This firm recently represented a commercial landlord with its claims against its tenant for non-payment of rent. Following the delivery of the required, written notice of breach and demand for possession, the tenant peacefully vacated the property. But the tenant, however, failed to pay the rent that was due to the landlord. For six months the landlord graciously worked with the tenant to try and reach an agreement, with regard to the unpaid rent. The obstinate tenant, however, refused to pay the landlord.
As a result, this firm filed a lawsuit for breach of contract against the commercial tenant, concurrently with the filing of an Application for Provisional Remedies. Within days of filing the lawsuit, the Court entered its Provisional Remedy Order and allowed the landlord to immediately, attach and garnish all non-exempt assets of the tenant, to satisfy the landlord’s anticipated damages that were in excess of $100,000.00.
Typically, debtors come to their senses by this time and pay what is due and owing (or at least stipulate to a judgment) – but not this tenant. Consequently, this firm orchestrated the execution of a Writ of Attachment, by arranging for a locksmith, the Sheriff’s Office (including members of the S.W.A.T. Team armed with their shields and riot gear), and four professional “movers,” to forcefully enter the subject property and seize enough assets of the tenant, to satisfy the anticipated judgment. Approximately four hours later, the professional “movers” had seized all non-exempt property. The asset seizure ultimately led to the entry of a Stipulated Judgment, and a favorable settlement.
Common courtesy and professionalism are indispensable virtues. But if a tenant cannot pay the rent and refuses the landlords’ reasonable requests, the landlord has powerful options to protect its financial interests. Quoted by Arizona’s “Provisional Remedies Guru,” Mark E. Lassiter, Esq.