Commercial Lease Renewal - How would you handle it?

[Sean Peters]

Hello All,

As I continue to deal with a difficult retail tenant in our family’s retail center, I wanted to get some input from the community as to what route, you as a landlord would take.

Details:

Property Type: Retail

Current Lease: 3 Years (ending soon) with an option to renew for another 3 (clause states that everything for the renewal will remain the same, except for the amount of rent.

Tenancy: Has been renting from us for 10+ years

Other info.

-Tenant is late on rent on average 5 months out of the year for the past few years.

-Have sent several notices (via email/USPS with tracking) to tenant regarding late fees, which tenant continues to ignore and never responds.

-Tenant only responds when they are need of something and is quick to reply when pertaining to their needs, however, never when we contact regarding late fees incurred and payment for fees.

-Would describe tenant as difficult throughout the years; argues/rude over the phone, complains when other units have something replaced, and in such cases, is not hesitant to contact me to ask why theirs is not being replaced.

-Throughout the years, tenant has consistently been rude to other family members (also owners) and consistently makes baseless claims that they spent several hundreds of thousands on remodeling the unit and changing floorplans (explicitly stated in the lease that this cannot be done without our consent) and has to always make the last point, regardless if it is reasonable and/or valid. ALL family members (owners) who have spoken to tenant have either been argued with or have been hung up on.

As this is a family owned business, I am merely handling this case but need to come up with a solution that all family members involved will agree to. Since the previous family member was not as experienced as myself and was a bit shy, tenant would be able to speak freely and with a sense of entitlement and “upper hand.”   Regardless of how calm/kind we have been, Tenant responds in an immature/childish way. However, I am not one to shy from anything. There is a lease with specific policies in place and tenant must abide by it. Tenant may not choose when to pay rent and whether they will pay late fees. Afterall, this is our property and this is a business.

The following is my plan. It will be great to hear if you think it is reasonable/the correct route to take. Also great to hear how you would handle it.

-Tenant has recently contacted me to state that they would like to exercise their option to renew.

-I have recently been given the task to handle this unit, I know the rent is roughly half of what it should be on the current market. The location of this specific unit is prime with great visibility. It is also rare for a unit of this size to come on the market, as most of the businesses surrounding it have been there for 15+ years.

My Simple Plan of Action

1) Considering the rent needs to be brought up to a reasonable market rate, right off the bat I plan on raising it for the new lease.

2) Since tenant continues to ignore/respond to any of my messages sent regarding late fees, I plan on mentioning a breach of contract, as the late fees are specifically detailed in the lease, and plan to begin a 3 Day Notice to Pay/Quit. This tenant has been nothing but difficult and seems as though they are somehow entitled and do not have to follow anything in the lease, I am adamant about actually collecting the late fees.

-Since tenant’s non-payment of the late fees are essentially a breach of contract, is it possible for me to refuse to renew the lease due to this, specifically since the tenant refuses to pay the late fees?

3)After raising the rent, I am 100% sure that tenant will begin to argue and make claims of the legality of raising the large amount at one time.

How would you respond to baseless claims of the legality of the rent increase?

I have spoken with an attorney (family friend) who has explained the legality, but I definitely would like to hear what your thoughts are and how you would handle this as many BP users have a great amount of experience in dealing with such tenants.

Looking forward to responses and thank you!