Several months left on auto body tenant lease, should we let him know we are not renewing now?

I've told the manager-owners that we should tell the tenant now so they have time to make arrangements. How do we avoid "loss of reputation" type of lawsuits if they don't agree to move out and we have to do a lockout? Tenant is paying below mkt rates on a high profile location (we caved to his request) and pays late very often, usually with "don't cash until..." requests. Always has an excuse. We'll definitely involve an attorney, but I thought I would get some insight from the experiences of others. Thank you!
In Property Management - Asked by jared n. - Aug 9, 2013
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Answer(s)

Linda K.
Broker/Agent
Los Angeles, CA

Current market conditions would dictate a closer look at what you are NOT attracting by letting the existing tenant control the asset. There is significant demand for auto use properties as many single tenant or stand alone buildings are simply not available. This has caused many good buyers to seek the alternative property out. Further a consolidation in this sector has a lot of auto related businesses for sale. An owner user is willing to pay a premium for a limited availability asset particularly if it is for sale. On the other hand an under market lease nets only the value the asset is producing.
A late paying tenant no matter how long they have been there creates problems for the owner and manager of the property. Tell the tenant the truth and why you are not renewing them. Whether the tenant is selling his business or needs to move they will also need the lead time.

Aug 9, 2013
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Bill B.
Los Angeles, CA

From the sounds of the pattern in payment of rent and "special requests" I would encourage you to wait until about 30 before, as they might just stop paying all together. With a mentality of "what are they going to do , kick us out?"
It may give them motive to move but it may give them motive to destroy and or not pay. In my limited opinion, wait until there are 30 days left. I think thats plenty of time for a quilified and motivated person.
Hopefully this helps or triggers great thought and ideas.
-gabriel olguin

Aug 10, 2013
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David V.
Broker/Agent
Mansfield, TX

My advice is refer to the Lease Agreement. Late pay situations and resulting repercussions are usually addressed in the lease which must be followed. Furthermore, I would advice that the tenants be notified immediately that their lease will not be renewed and better yet, what does the lease state concerning this. My experience in court is that the judge is going to request a copy of the lease and is going to use it to render judgement.

Aug 12, 2013
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Thomas K.
Broker/Agent
Knoxville, TN

I would suggest going by exactly what your lease says. If you do not have to tell them until 30 days before, then don't tell them until 30 days before. Sometimes no rent is worth more then the aggravation of dealing with a slow or non-compliant tenant until you can find someone else to lease. If you give them too much notice, they might cause harm to your building, or at the very least not maintain the building during the longer period. If you are worried about loss of reputation, and they are slowing paying you, then who else are they slow paying? The people they would tell to harm your "reputation" are probably not credit worthy as well. Business is business!!

Aug 13, 2013
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John P.
Broker/Agent
Glen Burnie, MD

It depends.. The lease notification requirement usually refers to the taking of an "Optional Period". If no optional period exists or your firm is planning on leaving, no lease requirement for notification exists. One should, however, look at any Lease clause that talks about "Holding Over". Base rents often move to 1.5 to 2 times previous rents. If you are going to move out be sure you do so promptly. If not this Hold-Over rent will accumulate rapidly and in the Landlord's favor... Good Luck with your Ownership.

Aug 18, 2013
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