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How to negotiate disputes with a defaulting tenant.

Article Excerpt
When a commercial tenant defaults on its lease obligations, the landlord has contractual and statutory remedies (including the ability to file an unlawful detainer action or other litigation). Notwithstanding this fact, landlords in today's softer commercial real estate market may consider attempting to resolve problems with struggling tenants before they rise to the level of a default under the lease or to assist a defaulting tenant to cure its default without having to resort to litigation. The landlord should evaluate how to respond to such tenants in light of current market conditions. When the real estate market is strong, a landlord may want to declare a tenant in default so that it can lawfully evict the tenant and replace it with a more credit worthy tenant or a tenant willing to pay higher rent. In a weak real estate market, with higher vacancy and lower rental rates, it may be in the landlord's interest to attempt to retain its struggling tenant as opposed to letting the premises sit vacant for a prolonged period of time. This article addresses the landlord's various options in negotiating with tenants in a weaker real estate market to either avoid defaults or resolve such defaults and continue the tenancy.

Evaluate Before You Negotiate

Whether a landlord chooses to negotiate with a defaulting tenant prior to or after the filing of a lawsuit, one thing remains the same--the preparation that must be done before the landlord ever sits down to the negotiation table. The landlord must first decide if it is even willing to negotiate with the defaulting tenant. If the landlord chooses to negotiate with the tenant, the landlord must then determine the tenant's financial condition. To that end, the landlord should request updated financial information from the...