When Should a Commercial Landlord Lock-out a Tenant

If you are a commercial real estate landlord in Arizona and your tenant is more than five days late on their rent payment, then you may have the right to enter the premises and lock out the tenant.  In some cases, you might be able to seize possession of the personal property belonging to the tenant and publicly auction the tenant’s property.  This will require waiting the amount of time required by law in Arizona and giving proper notice.

This course of action must be handled with care and precision and it should generally be regarded as a course of last action.  There is significant liability for the landlord if the process is not handled by the letter of the law.  If you have a tenant that has fallen behind, you should work with an experienced real estate attorney in Arizona to make sure every detail is handled properly and lawfully.

Review the Commercial Lease Agreement

The first step if your tenant is late on a rent payment is to review your lease agreement with an experienced real estate attorney.  You want to confirm there is no language in the lease agreement that restricts or prohibits the landlord from a lock-out.  Most lease agreements will also require the landlord to provide written notice to the tenant before a lock-out.  The tenant will have a reasonable amount of time to respond and cure the default.

You want to be certain that you have not failed to comply with any requirements or provisions of the lease agreement before you consider a lock-out as well.  Any breach of the lease agreement by the landlord can give the tenant the right to withhold the rent payment until the breach has been cured.  This is another instance where you can have significant liability if you are in breach of the lease agreement as the landlord and then lock-out the tenant.

Important Steps to Consider Before a Lock-out

The next step that is necessary before locking out a tenant from your building is to give them a reasonable amount of time to make the payment.  You can require a penalty for the late payment, but they should be given notice of the additional fee and time to make the payment.  This is a reasonable approach to the situation and demonstrates that you took steps to work directly with the tenant before moving on to a lock-out.

You will also need to consider whether you have routinely accepted late payments in the past without any penalties.  Arizona adheres to the rule that repeated acceptance of late payments constitutes waiver as a matter of law. This does not mean you will not be able to eventually resort to a lock-out, as a landlord can always give clear notice of intent to reinstate that time is of the essence and future payments must be made in a timely manner.  However, it makes it more important to work with an experienced attorney that has been informed of the late payments you accepted in the past without issue or penalty.

Understanding Breach of the Peace

A tenant lock-out cannot be performed if it will interfere with the public order.  This is generally defined as any actions or speech that could produce violence.  It is always prudent to avoid any threatening actions or words.  It is essential to remain calm and handle things in a peaceful and respectful nature.  If a landlord is in a situation that might become emotional or argumentative, they should have an experienced attorney handle all interactions with the tenant.

Other Important Considerations Before a Tenant Lock-Out

It is easy to get frustrated as a landlord if your tenant falls behind on their rent and does not present a clear path to resolve the matter.  However, you should take a step back and figure out if a lock-out is the best course of action.  The lock-out may result in the closing of the business if they are unable to perform their services or sell their products.  This would most likely result in a lengthy bankruptcy process that will prevent you from collecting any rent in the short term and you will probably not be able to rent the office space to another tenant for a long time.

If your tenant provided a personal guarantee in the lease agreement, then you might be able to obtain a judgement against the guarantors on the contract without having to perform a lock-out.  This process can result in the tenant having to turn over the business property and premises to the landlord in a more expedited manner.

MacQueen & Gottlieb has significant experience with transactions between landlords and tenants in Arizona.  Our firm can review your case and lease agreement if a tenant has fallen behind on their rent payments.  We can assist you in determining the best course of action to the resolve the matter without exposing you to unnecessary legal exposure.  Contact us today at (602) 533-2840 to schedule an initial consultation or make an appointment online.