Can a Commercial Landlord Engage in Self-Help Against a Tenant in Default?
Maybe, But It Depends Upon the State in Which the Property Is Located
The COVID-19 pandemic caused unprecedented financial damage to the commercial real estate sector. Commercial landlords were forced to make difficult decisions, including whether to accept rent abatements, payment deferrals, delayed tenant buildouts, lease renegotiations or other means of achieving a commercially reasonable outcome. Many landlords, however, either had no choice or opted to pursue formal eviction proceedings – against those tenants including small businesses, restaurants, bars, etc., that suffered financially during the pandemic and defaulted on their leases – to retake possession of their premises or recover what they could in unpaid rent and other leasehold financial obligations such as taxes and water. In less frequent circumstances, some landlords took matters into their own hands by avoiding court intervention and exercising self-help tactics such as placing locks or chains on doors, changing locks or deactivating keycards to evict their tenants in default.
For landlords operating in multiple states, hiring a law firm that knows the nuances of when self-help is permitted is essential for efficient lease negotiations and enforcement. And just because a lease purports to allow self-help evictions does not mean a court will enforce that provision. This blog highlights, by example, the various ways in which states address the use of self-help by a commercial landlord upon a tenant's default.
Under Florida law, commercial landlords are prohibited from taking matters into their own hands. The court in Palm Beach Fla. Hotel v. Nantucket Enterprises, Inc., 211 So. 3d 42 (Fla. 4th DCA 2016), citing Florida Statutes, Section 83.20, recognized that the "only" methods a landlord can utilize to retake possession of its premises from a tenant in default are by: 1) court order granting possession to the landlord; 2) when the tenant surrenders the premises to the landlord; or 3) when the tenant abandons the leasehold. Significantly, the Court in Palm Beach Fla. Hotel affirmed the trial court's award of $8.8 million in favor of the tenant after determining that the landlord – who did not comply with the above-referenced statutorily enumerated methods – had wrongfully evicted the tenant notwithstanding that the operative lease authorized the landlord to exercise self-help in the event of the tenant's default.
In Texas, a commercial landlord is prohibited from, among other things, interrupting a defaulting tenant's utilities, removing doors or windows, and removing a tenant's furniture, fixtures or appliances. Tex. Prop. Code, Section 93.002 (a)-(c). However, the landlord is permitted to prevent a tenant from entering the leased premises without judicial process by "changing the door locks of a tenant who is delinquent in paying at least part of the rent." Tex. Prop. Code, Section 93.002(c)(3). In other words, while a commercial landlord cannot utilize self-help if a tenant fails to comply with its non-monetary obligations, it does have the right to limit a defaulting tenant's entry into the leased premises by changing the door locks, provided the landlord places "a written notice on the tenant's front door stating the name and the address or telephone number of the individual or company from which the new key may be obtained … [t]he new key is required to be provided only during the tenant's regular business hours and only if the tenant pays the delinquent rent." Tex. Prop. Code, Section 93.002(f). Importantly, if a commercial landlord fails to comply with Section 93.002(g), the tenant may be entitled to recover possession of the premises, terminate the lease and pursue damages from the landlord.
Under Georgia law, "a landlord may contract to avoid [the statutory notice and other requirements of dispossessory proceedings set forth in O.C.G.A. Section 44-7-50 et seq.] when renting property which is not to be used as a dwelling-place." See Rucker v. Wynn, 212 Ga.App. 69, 70 (1994). In Rucker, the Court determined that a default provision contained in the parties' commercial lease agreement entitled the landlord to change the locks on the doors and reenter and take possession of the property upon the tenant's nonpayment of rent – provided "this can be accomplished without a breach of the peace" – without notice or resort to legal proceedings to allow the landlord to re-lease the premises. See id. at 71. While the parties to a commercial lease are free to negotiate the parties' respective remedies in the event of a breach, including the right to exercise self-help, Georgia law does not expressly permit or prohibit the use of self-help by a commercial landlord seeking to repossess the premises upon a tenant's default.
In Oregon, in the event of a breach of the lease by a commercial tenant, the landlord can utilize self-help and change the locks to retake the premises only if the lease permits it and the landlord undertakes the eviction "in a peaceable manner and without force." O.R.S. Section 105.105; see also Jordan v. Wilhelm, 770 P.2d 74 (1989), rev den, 308 Or. 79 (1989) (affirming judgment for the defendant landlord in a conversion action that locked the plaintiff tenant out of its office).
For commercial landlords, deciding whether or not to move forward with formal eviction proceedings can be unappealing and even frustrating. However, if you are commercial landlord contemplating the use of self-help rather than formal litigation, it is imperative that you understand whether the applicable law permits such a remedy. Even if the applicable state law allows a landlord to utilize self-help, either by statute or pursuant to the terms of the lease, make sure to comply with any rules that govern the manner in which self-help is carried out. And the commercial landlord must always be aware that even if self-help is permissible, such an action carries risk and may not always be the best course of action, as it may expose the landlord to damages for unlawful eviction, trespass, conversion and other possible causes of action by the tenant.
With 27 offices throughout the United States, Holland & Knight's real estate litigation attorneys have the experience and resources to help commercial landlords who are considering the eviction of tenants in default.