Commercial Real Estate – When the Tenant Dies and You’re the Landlord

You are a landlord in a commercial real estate lease and the tenant is an individual or the principal owner of a legal entity, such as a corporation or an LLC (limited liability company), who may be the primary guarantor for the payment of rent. The tenant has died. What should you do to protect your investment and make certain your future actions are within the context of the lease agreement?

You will deal with a new person when the tenant is deceased. Be proactive, identifying who is that new person in charge and spelling out the future actions between you, as the landlord, and the deceased tenant’s legal representative.

When you have a commercial real estate lease and your tenant has passed away, consult a real estate attorney. Howard Stross is Board Certified in Real Estate Law by the Florida Bar Association. He can help guide you through the process. Call for a free consultation:  (813) 852-6500. Here are the basic steps to be taken to help protect a landlord’s interest in a commercial real estate lease:

• Read the commercial real estate lease. Note any critical dates and terms, such as the frequency of rent payments, the due date for the receipt of rent by the landlord and any required action by the tenant.
• Rent payments. Determine if the tenant’s estate will be a probate administration, trust administration or both. The same applies to the guarantor of the rent payment if that person dies.
• Claim for rent payment. Work with your attorney to have a creditor’s claim for the payment of rent prepared and filed with the Clerk of Court, Probate Division, in the county where the deceased tenant or guarantor resided. Be alert because a short time is allowed in probate for a creditor to file its claim, i.e., 90 days after the first publication of the notice to creditors. If a probate has not been opened, the landlord may file a “caveat” with the Clerk of Court. A caveat is useful if the landlord is apprehensive about a probate estate being administered without the landlord’s knowledge. The caveat may be filed only after the tenant’s (or guarantor’s) death.
• Probate administration or trust administration or both. Some or all of the tenant’s estate may be subject to probate or trust administration. If there is no probate, it may mean a successor trustee is the only contact. Ask the Clerk of Court if a Notice of Trust was filed with the Clerk’s office. If there is a trust administration, a Notice of Trust must be filed with the Clerk to publically inform all of the deceased tenant’s trust, including the name and contact information of the successor trustee. Send a claim to the successor trustee for the payment of rent and anything else tenant must pay under the lease.
• Decide whether to terminate the lease. Determine if the lease requires prior notice to tenant of landlord’s intention to terminate the lease. If the lease allows for such an action, it might make business sense to do so under current market conditions.
• Leased space evaluation and documentation. If the lease will be terminated, have an exit walk-through of the leased space with the lawful representative of the tenant to obtain a written statement that the leased space was left in the condition called for under the lease or to identify and list any damages to be repaired. All or part of the tenant’s deposit may apply to such repairs. If a walk-through is not possible, take photos of the interior and exterior of the space with a witness present. If the tenant’s deposit will be used for repairs, show the date the photos were taken by including in the photos a copy of a dated newspaper. Read what the lease requires of the landlord to retain the tenant’s deposit.
• If claim to tenant’s deposit is anticipated. If the landlord intends to claim against the tenant’s deposit, a separate creditor’s claim should be filed in probate for the amount claimed. If there is a trust administration, give written notice of the landlord’s intent to claim. A claim should be filed, or notice given to the successor trustee, in a timely manner relative to the estate of the tenant, even if much time remains before the expiration of the lease term.
• Actions required of tenant. If the lease requires the tenant to do something, give notice to the legal representative of the tenant describing the required action and when the action must be completed. Whether the tenant or the landlord is the one required to take an action, both the tenant’s representative and the landlord should agree on the details of the required action and the required date of completion.
• Tenant’s Ownership. If the deceased tenant is an owner of a closely-held corporation or LLC and that legal entity is the tenant, the landlord-tenant relationship may continue. This might occur if the legal entity will remain in business or continue to operate because other owners exist, besides the deceased tenant. On the other hand, perhaps the deceased tenant was the only owner and there is no one else to continue the business. Perhaps the beneficiaries of the deceased tenant do not want to continue operating the business. In these situations, it is best to confer with a real estate attorney about the options available in the lease or allowed by Florida law.

The above is not an exhaustive list of everything a landlord should consider when its commercial real estate tenant passes away. We encourage a landlord to be proactive with the deceased tenant’s legal representative. Landlords are encouraged to seek the advice of legal counsel before taking any step. We can help. Howard Stross is Board Certified in Real Estate Law by the Florida Bar Association. He can help guide you through the process. Call for a free consultation:  (813) 852-6500.