Q.: We assumed a lease at a shop and, in light of the current economy, our sales have dropped. I am behind on rent and I’m being evicted. The owners are pursuing the balance of the lease term (three years). I tried to settle outside of court but they will not budge. What can I do?
A.: Unfortunately, commercial leases are tough to get out of – much more so than residential leases. If the commercial lease is with your company (that is, a corporation or LLC) alone, and you have no personal obligations to pay the rent once you’ve vacated the space, you may be able to convince the landlord (even at the “courthouse steps”) that trying to pursue a lawsuit and judgment against the company will be like trying to squeeze blood from a stone. If there’s no money in the company, there’s nothing for the landlord to collect.
However, if you signed a personal guaranty on your commercial lease, your personal assets will be on the line. Depending on how your commercial lease is worded, filing for bankruptcy may or may not get you off the hook. But your personal credit could be adversely affected. Best bet is to consult with an attorney who understands both real estate law AND bankruptcy law so that you can explore all the options.
What other law questions do you have about commercial leases and office space?