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31
Posts
2
Votes
Michael G.
  • Investor
  • Camp Verde, AZ
2
Votes |
31
Posts

Recourse options for Commercial Lessee for nonpayment

Michael G.
  • Investor
  • Camp Verde, AZ
Posted

Hello BP!

I'm trying to get out first commercial venture, a 3 unit office building purchased 9/2018, up and running smoothly but suddenly having problems with one of our tenants paying rent.

Building was built in 2004 by tenant to run their Medicare Home Healthcare business, occupying Units 2 and 3. They ran into some internal squabbles that forced them to sell the building in 9/2018, but they wanted to remain a tenant and consolidate into just Unit 2.  They were fine with this arrangement, and they paid rent in 10/2018, 11/2018, 12/2018.  (Apparently they have an arrangement with Medicare where Medicare reimburses them for the rent, although the lease is in the tenants name with no mention of their Medicare arrangement). 

  • Upon closing, we asked them for new 3 year lease for $3K/mo, which they told us in writing that Medicare had approved, although we never received a signed copy back.
  • We have a Lease Estoppel Letter from their attorney for a $3k/Mo lease between tenant and their Trust who previously held title as part of our due diligence, although there is no tenant signature on it.
  • Given the two facts above, do we have a lease leg to stand on?

In January 2019, they stopped paying rent, changing their story that Medicare now had issues paying the same rate for less floor space.  Our position is the tenancy is between us and tenant, and their arrangement with Medicare does not absolve them from paying rent.

Our concerns:

  • The strongest thing we have is the Lease Estoppel Letter which includes a copy of their old lease, although there is no tenant signature on it.  Does this document have any enforceability to it?
  • They are two weeks late on Jan rent, and every attempt to get them to pay is either unanswered or a stream of excuses about Medicare or the Government shutdown.  I'm new to this but I don't want to come off as an amateur, but I think this tenant is purposefully testing their bounds with us.
  • I'd really like to keep them as a tenant as they are in at a good rate for us and they are the kind of business that we like to have as tenants, but I'd like to find a way to get them back paying again.
  • What can I do to help compel them to start paying?  We've had 4-5 email exchanges going nowhere, which I think exhausts the Cooperative Approach and I'm ready to maybe have an attorney write them a letter or serve them with something?  Again, the goal is to keep them if we can so I don't want to threaten to kick them out just yet.  Or do I?  

Thanks for bearing with me on the detail read. I'd appreciate any advice that you could offer!

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