Some of the following provisions in new or renewal leases, which would become effective after a tenant defaults, may be highly motivating to encourage timely payments from commercial tenants:

If a tenant is late with rent or other financial lease obligations, landlord should require that automatic transfers or debits be used for all future payments based on rules set forth by him or her.

When a tenant fails to make payment in a timely manner more than once, a late fee should be imposed with the amount increasing by a specified percentage for each following violation.

Instead of continuing with rent payments made at the beginning of each month, those tenants not meeting their financial obligations should be required to make quarterly payments in advance on the first day of the first month during the term of the lease.

In the event of tenant default, the landlord should have the ability to increase the amount of the security deposit which should be in the form of a letter of credit which protects the landlord in case the tenant files for bankruptcy.

Rights and options under the lease remain in effect as long as the tenant is not in default. Such rights usually include options to renew or terminate early and the ability to expand or contract the leased premises.

Landlords may require anywhere from one to three month’s security deposit from their commercial tenants if stated in the lease and agreed upon by the tenant. However, residential landlords are limited to a maximum of two month’s security deposit.

Commercial landlords may also require that the bank provides a letter of credit for those tenants who are not financially stable – or for those tenants who wish to have expensive modifications made to the rental premises.

Evicting residential tenants is very time consuming and difficult in some states. Before any legal action is taken, the landlord must first give the tenant a Written Notice to Quit which provides time for them to fix any problems.

It is not absolutely necessary for the landlord to give any written notice to commercial tenants before filing a lawsuit to evict them. However, it is recommended that tenants be provided with written notice and a chance to make changes in any existing problems to avoid legal issues.

It is always good business sense to consult your attorney before entering into any legal agreement with commercial or residential tenants or before attempting to make any changes in existing agreements.

Be pleasant – it costs nothing and builds up goodwill. Smile and say “hello” in the hallway or elevator. When a tenant calls with a legitimate concern, do not act as if he or she is a nuisance. Either you or your representative should investigate and if there is a valid problem, fix it. If it cannot be immediately addressed, inform the tenant when the problem will be corrected and see that it is handled.

Communication is important. Have regularly scheduled maintenance and inform your tenants in advance so that they may plan for any inconvenience.

Maintain your property so that it is clean and attractive to existing and prospective tenants.

If a tenant wants to make changes in the space rented, be agreeable if the modifications will not be too difficult to live with. Be sure their lease clearly states that they must return the premises to original condition at their own expense.

Keeping your tenants is easier on your property. Each time furniture is moved in and out of the building, there are more chances of damage to floors, walls and elevators.

As we all know, there are many, many vacancies in commercial buildings and the competition for tenants is fierce. If you have good tenants, extend yourself to keep them as they help keep your business profitable.

A skilled and experienced landlord’s representative can handle all of these issues and more. A qualified landlord’s rep will promote your best interests, and maintain confidential information.

A listing broker will work with other agents to promote the property and give it exposure to hundreds of possible tenants.

The following Tips for Landlords offer advice for property owners. Cost effective consideration should be given to turning all of these duties over to a trusted and qualified landlord’s representative.

A significant security deposit is an important safety factor to make up for lost rent and expenses involved in finding another tenant for the vacant space when a lease has to be terminated. When a space is modified to accommodate a particular tenant and this modification will not suit the average tenant, a larger security deposit is appropriate to pay for restoration of the premises for potential future tenants.

Before an initial lease is signed, the landlord should evaluate the financial strength and credit of the tenant and the signatory of the lease agreement. Reviewing this information is an important part of the landlord’s due diligence and a clause in each lease should provide for submission of updated financial statements for tenants and guarantors.

Well written leases should include provisions for late charges and late payments. A short time period should be stated for tenants to cure default in payment which, if not done, allows the landlord to terminate the lease and take back the space. The leases should also include a clause that allows the landlord to recover attorney’s fees from a tenant in default.

In addition to protecting the landlord in economic down times, strongly written leases are also valuable assets. When the market ultimately improves and investors are seeking to purchase commercial properties, financially solvent tenants and solid lease agreements will help to increase property values.

Based on the problems in the nation’s economy, some commercial tenants are asking for a rent reduction in exchange for an early lease renewal. Before making this accommodation, landlords should request a copy of the tenant’s financial records to be sure that there is actually a problem and not merely a desire from a financially sound tenant for a reduction due to the overall economy.

When entering into a lease agreement with a new tenant or renewing with an existing tenant, landlords should keep lease terms short and not commit for more than three years. Eventually, the market will improve and making renewal options fewer and for shorter periods of time will help landlords to recoup their losses.

Giving each tenant one month’s free rent per year instead of rent reduction may help to stabilize rates of rental when the market begins its recovery. Spread the free months out among all tenants so that there is not one month when rent is not paid. Consider a provision in the lease so that if a tenant defaults, the free month will be added back when totaling damages.

Another possibility for landlords when granting a reduction in rent is to ask for collateral such as personal guarantees of the tenant’s owners or guarantee of the parent corporation.

Consider Local Laws Regarding the Termination of a Lease

One of the first issues you will need to consider when deciding whether to release your tenant from their lease involves your state’s laws; in other words, commercial and residential tenant situations are far different, in the eyes of the law. You must also consider whether you will be able rent the vacant space in a reasonable amount of time, and whether the tenant is willing to offer up a concession in return for cancelling their lease.

Should you Release your Tenant from their Lease?

It is important to realize that, unless your tenant is willing to offer up a really valuable concession, or if you have another tenant ready and willing to take the current tenant’s place, then it probably isn’t in your best interest to release a tenant from their lease.

In fact, if the tenant moves without finishing up the current lease, you will likely be able to recoup your rent costs through litigation. Often times, you can avoid litigation if the tenant is willing to offer you a buyout on the lease. There are also situations where you can retrieve the difference in rent if your tenant leaves before the end of their lease and you are forced to rent out the commercial space at a lower rate.

All of these options typically require the help of a qualified commercial real estate attorney, so don’t head into this territory without one, or it could cost you big.

Consider your Ability to Re-Rent the Property

The bottom line is that you must ask yourself the most important question: How long will it take me to rent out the commercial property? If you are able to secure a new tenant in a short amount of time then it is probably not worth the time or the effort to collect the unpaid rent from the tenant. However, in slow markets like this one, you may be unable to rent out the space for a long period of time; this is most definitely a case where litigation is necessary to recoup some of your losses.

In the end, however, it is important to pay close attention to your local laws regarding terminating leases, as many times your tenant may be able to do so legally, such as a transfer or loss of a business.

It is important to understand both your rights and obligations as a landlord. The following tips can help guide you through the process:

1. The first order of business after you have discovered that your Dallas commercial real estate tenant has filed for bankruptcy is to consider whether the lease is to be assumed or rejected. The United States Bankruptcy Code requires that your tenant either assume or reject the lease within 60 days of the bankruptcy petition date. If your tenant fails to assume the lease during this time period then the lease is deemed rejected. As the landlord, you may petition the bankruptcy court to receive the answer from your tenant before the 60 days has expired, particular if you feel that you may lose another potential tenant as a result.

2. If the tenant chooses to assume the lease, you have the right, as the landlord, to monitor the bankruptcy case and make sure that the tenant remains in compliance with its debt obligations, as bankruptcy laws require that the tenant continue to perform its obligations under the lease.

3. It is vital that the landlord file its proof of claim in Chapter 7 bankruptcy cases. The proof of claim includes accrued rent, CAM charges, taxes and related fees. Filing a proof of claim is more complex in Chapter 11 cases, and will depend on whether the lease has been assumed or rejected. It is important, however, that you, as the landlord, file your proof of claim in a timely manner to ensure that the lease amount is paid.

4. You may need to submit a tenant letter of credit (in lieu of a tenant security deposit) as to avoid caps on lease rejection damages. Although the letter of credit does not produce guaranteed results, it does provide the landlord with an opportunity to the details of the lease as it is being drafted and signed. This route is often effective when dealing with larger tenants.