How Commercial Landlords Can Position Themselves to Deal With Current Marketplace Conditions

Monitor and Review Leases

Because the real estate market was booming for so many years, landlords did not have the time or the desire to monitor their tenants closely or to enforce certain lease provisions. Landlords need to make the time to clean up their records, familiarize themselves with their tenants and enforce existing lease terms. Specifically, landlords should:

• Request updated financial statements from their tenants and monitor tenants' current financial status more closely. A hotly sought-after tenant a year or two ago could very well be on the brink of bankruptcy today.
• Make sure leases have not been improperly assigned or the premises unknowingly sublet. Each landlord should always know who its tenants are in case it has to evict one.
• Check the existing amounts in all tenant security deposit accounts and require tenants to bring any security deposit shortfalls current.
• Confirm the expiration dates of any letters of credit and the location of the originals. Make sure each letter of credit has been assigned to the current landlord; a generic assignment of security deposits is not sufficient. Each issuing bank has strict assignment procedures that must be followed closely. If a letter of credit has not been properly assigned, the prior landlord (beneficiary) will have to be located and the letter of credit formally assigned or endorsed pursuant to the issuing bank's internal requirements before the current landlord can make any draws under it. In many instances prior landlords no longer exist and it may take several months to locate the former officers or company officials to accomplish this task.

These common sense 'housekeeping' suggestions may seem overly simplistic, but they will save precious time and prevent unnecessary aggravation when dealing with defaulting tenants.