3 bad credit scores but 3 month security deposit ok?

4 Replies

Hi BP! I want to get your opinion. Summary: California, Small commercial unit 3 people want to open up a retail business, but all 3 have bad credit scores (high 500's). They are willing to put all three names down on the lease and put 3 month security deposit. Unit has been vacant for a month now. Little interest on it. What do u guys think? On a related note, if we had to evict for this commercial unit, would it be similar to evicting one person or would there be 3 seperate trials since there are three individual adults? Thanks BP!

Just spitballing here, since nobody has replied yet... can you get the 3 month security deposit but only have one person sign the lease, so you have less paperwork in the future?

Obviously we all hope that their business does great and there's never a need to pursue legal means, but in the worst case scenario I would want to have the strongest tenant as the main signer.

The business these three are going to operate should be operated through a DBA if they're going to actually have a business name and they haven't formed a legal entity. Have you asked them how they plan on operating their business?

If they don't have a DBA or legal entity then maybe their not ready to begin operations and may not be a good tenant selection. It's true they could get business permits in their personal name(s) but you would think they would have preplanned this before actually negotiating for a building space.

One entity, one eviction should you need to evict. 

If they cant manage their personal credit how are they supposed to manage a new business? If they had no credit because they all pay cash for everything I would say maybe. Chapter 13 from medical ok maybe. Here you have 3 people with bad credit... Highly unlikely they all did one of those two things. Its probably worth holding out and marketing the property more. Lowering the rent might be an option to place a Tennant additionally depending on the market conditions.

im sure by now the deal has either been done or not done, but for us it would depend on how much buildout would need to be done to the space. If nothing has to be done and they arent going to change it up too much then you could probably take a chance on them. It has also been our experience that if you do have to evict them, its a strong possibility that you'll never see payments even if you win the judgement in court or maybe you'll have better luck than we do. 

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