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Commercial Rental Risks

With an anticipated increase in defaulted commercial mortgages, what’s going to happen to small businesses that have security deposits tied up in their leases?

I’ve heard of several small South Florida based companies each experiencing an identical scenario.  Each of the businesses have an existing lease, their landlord has defaulted on their mortgage and the bank comes in to collect rents. This scenario has inevitably ended up with the small business owner not only being displaced (eventually) but also losing their security deposit which in many instances can add up to thousands of dollars!

Please allow me to clarify matters a little.  The small business owner, who is struggling to survive, pays their rent to a building owner who in turn does NOT pay their bank.  Every month the tenant performs in accordance with their agreement with the landlord and the landlord puts the money in his coffers with no intention of paying the tenant for his security deposit(s) upon lease termination or bank take over.

Is there a law against this?  If not, shouldn’t there be?

I don’t care whether the landlord pays his mortgage or not.  It’s none of my business.  I do care, however, when money which is rightfully owned by a tenant (i.e. – a security deposit) is not refunded to their rightful owner at the termination of a lease period.

There are lots of remedies available to the tenant including but not limited to:  attorney representation, negotiations with the landlord or reporting the action to the applicable State Agency governing Commercial Tenancy Matters.  While some remedies may be cost prohibitive, others are not.  I encourage anyone in this type of arrangement to carefully consider their options and formulate a plan of attack in an effort to secure what is rightfully theirs.   You should probably start out speaking with the Landlord to determine what their real intent is.

In the meantime, if you are a real estate professional, you may wish to consider viewing the public records of the landlord(s) and/or their associated corporations to get a feel for any publicly known financial issues that they may be facing.

What a world we live in…

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