Be Careful! Commercial Landlords Should Exercise Care When Tenants Don’t Pay…

By:  Benjamin Tenenholtz

What happens when commercial tenants don’t pay their rent?  Commercial landlords, much like residential landlords, have the right to lock a tenant out of the subject property. However, landlords must be careful to follow very specific rules outlined in the Texas Property Code, lest they subject themselves to a suit for unlawful lockout and reentry onto the property.

1. Make sure your tenant’s rent is delinquent

First, the landlord should make sure that the tenant is actually late in paying all, or at least part, of the rent. This sounds simple, but it is good practice to ensure that your accounting has been done accurately, and there are no outstanding credits or other billing issues.

2. Post notice of lockout

Next, the landlord should post a written notice on the tenant’s front door stating the name and address or phone number of the individual or company from which the tenant can obtain a new key. The new key is required to be provided only during the tenant’s regular business hours, and then ONLY if the tenant pays all delinquent rent.  This is unique to a commercial tenancy, as a residential tenant has a right to reenter regardless of whether he or she has paid the rent.

3. Lockout the debtor tenant

It is important to note that, unlike with residential rental property, the landlord of a commercial property does not need to post advanced notice before locking out the commercial tenant. The posting of notice and the lockout can happen simultaneously.  It should also be noted that to the extent that any provisions in the commercial lease conflict with the law contained in Texas Property Code 93.002, the lease’s language will supersede the Property Code.

4. Take steps to secure payment of delinquent rent

Once a landlord has successfully locked out a non-paying tenant, she can then petition for, and attempt to foreclose upon, a building landlord’s lien. The Property Code is designed to ensure that a landlord’s lien gets paid before other creditors of the debtor tenant. The landlord can also file an application for a distress warrant. A distress warrant allows a landlord to seize some of the debtor tenant’s property (subject to posting a bond) in order to ensure that her landlord’s lien is preserved until it can be foreclosed upon.

5. Be careful!

If you are a commercial landlord or tenant and are unsure of the steps you should take when dealing with a commercial lockout, consult with an attorney. Violation of the rules contained in the Texas Property Code can subject a commercial landlord to fines, attorney’s fees (both for herself and for the wrongfully locked out tenant), and court costs.

Remember folks, at the end of the day there’s no substitute for having a lawyer of your own.

And as always, our blog postings are not legal advice, nor do they constitute an attorney-client relationship!