Recovering Rental Damage from Tenants

December 22, 2011

The termination of a rental with commercial real estate Tenants can be either a very smooth affair or a disruptive, costly one. Unfortunately, when commercial real estate Tenants damage property it may occur due to retribution for being evicted or having the rental terminated. Sometimes, due to feeling slighted, commercial real estate tenants opt to cause as much damage as possible to make the Landlord’s decision as expensive as possible. Other times when commercial real estate Tenants damage property, they just happen to be messy people, causing significant cost because of a lack of cleanliness. 

In either case, the standard recovery method when commercial real estate tenants damage property starts with the rental deposit taken from the tenant at the beginning of the rental, paid with the first month’s rent. A good commercial real estate rental agreement in such instances makes it clear that the deposit cash will be used to offset expenses of cleaning and repair when Tenants damage property.

To bolster this term, Landlords should then review the condition of the room or unit prior to renting, have the commercial real estate tenant sign it, and keep the condition document as a review checklist when the commercial real estate tenant is moving out. 

However, in some cases when commercial real estate Tenants damage property the repair cost can be far more than the rental deposit provided. To avoid this costly affair or at least reduce the loss,

Landlords should make sure to inspect the rental property or unit prior to releasing the commercial real estate Tenant from the tenancy. This allows the Landlord to compare the previous condition report with the new one and make a demand for repair or recovery ahead of time. 

In those instances where commercial real estate Tenants damage property and then just leave, clearly the first step involves seizure of the damage deposit. The Landlord typically has a duty to mitigate costs and not be exorbitant in expenses. Additionally, only the cost difference outstanding can still be pursued once the deposit is applied to expenses. 

The Landlord has a few choices to make where further recovery is needed. 

First, where commercial real estate tenants damage property and the cost difference is small, it’s probably not worth pursuing. The Landlord would be better served cleaning the unit up and trying to get a new Tenant in as quickly as possible to restore rent payment revenue. Pursuing small costs in court is meaningless because the legal representation and filing fees a Landlord will end up paying can be far more than the recovery amount. The court ultimately treats rental agreements as contracts in which punitive damages are generally not allowed in litigation. 

Landlords should always remember they can’t personally go and recover when commercial real estate Tenants damage property. This is considered vigilantism and can result in personal arrest. 

Second, if damage is going to be pursued legally, the process can be long and arduous. Courts don’t address where commercial real estate tenants damage property right away unless life or public safety are threatened. This is because such issues are part of rental agreements which are contracts.

A Landlord recovery case in practice could easily take three or more years to wind through the civil court system. Finally, a commercial real estate Tenant could ultimately be a deadbeat or claim bankruptcy instead of paying the judgment. So the whole process may be an eventual loss. 

It’s critical to be able to prove the extent of damage quickly as the court hearing doesn’t allow much time for reviewing the case. If commercial real estate Tenants damage property, the best recording can be photographs. Not only do photos provide a visual record that can be transcribed later into reports, it also shows the extent of damage very quickly to most observers. 

Alternatively, when commercial real estate Tenants damage property and it is outright offensive and malicious, and/or appliances or equipment were stolen, one could pursue a criminal charge. Vandalism and theft are both violations of various criminal codes in numerous jurisdictions. As a result, a Landlord can pursue a restitution action for recovery. 

A restitution action is a blend of both civil and criminal law, which is rare for Landlord-Tenant legal situations. Where commercial real estate Tenants damage property and the un-recovered cost versus the deposit exceeds $500 or so, it gets into the range of vandalism and a criminal action if intentional. Additionally, with appliances and property being removed, theft can be thrown in and if large enough in dollar-value, grand theft larceny. 

If a Landlord can convince a local prosecution to pursue the criminal case after filing a police report, a judgment against a former commercial real estate Tenant can include a sentence of jail and penalties unless the former Tenant pays for the damages (the restitution). Unlike a civil judgment, if the commercial real estate Tenant doesn’t pay, incarceration is a real threat. Criminal courts don’t like it when people don’t listen to their sentences. Again, however, pursuing a criminal action in court takes time, paperwork, and sometimes money. If the recovery is minor, it may not be worth the trouble. 

Source: Property Management Direct

 

DISCLAIMER: This blog has been curated from an alternate source and is designed for informational purposes to highlight the commercial real estate market. It solely represents the opinion of the specific blogger and does not necessarily represent the opinion of Pacific Coast Commercial.