Ask Me Help Desk - SC Commercial Eviction Questions

Hi, I am in South Carolina, and due to current economic conditions, my retail store has been unable to pay our rent (commercial rental). We have received a notice from the landlord's attorney giving us 10 days to pay the amount in full or face eviction. It is not possible for us to pay the amount owed in the time given, so eviction will surely follow.

My questions are these: 1. From what I understand, the landlord cannot lock us out without first receiving a court order (after we go to court). Is this correct? 2. Can the landlord legally seize inventory in the store before or after receiving a court order for eviction? 3. If we vacate the premises and move the store to another location, of course we will still owe the landlord the back rent, but can they seize our property from another location? What recourse does the landlord have if we move our operation prior to receiving the actual eviction notice?

Basically, we have a person with another retail space willing to help us move and allow us to continue to operate there. Is it legal for us to do this or will the landlord be able to seize any inventory we have to apply to back rent, even if it is no longer on the landlord's property? Will our LLC still be allowed to conduct business in another location even while owing the previous landlord rent? And finally, if it is feasible for us to move, how long does it generally take for the court to grant an eviction and force us out?

We have every intention of paying the landlord the money owed, but it will be nearly impossible to do so if the store is closed down. Any help anyone can provide is greatly appreciated. Thank you!

1. It depends on what your lease says. If your lease doesn't give the landlord permission to lock you out then they can't do so without a court order.

2. It depends on what your lease says. This is called "distraint" and if the lease says that your landlord has the right of distraint then they can seize your inventory, fixtures, etc. sell them and apply it to rent owed.

3. The landlord cannot seize your property if it is in a different location unless he has obtained a money judgment and order for attachment.

Yes, you will be able to conduct business at another location. But if the landlord sues your LLC and obtains a judgment then they will have the right to attach and sell the LLC's property at any location.

Have you tried talking to the landlord about a reduction in rent? Or working out a payment schedule? The landlord would probably rather have a tenant paying less rent than no tenant and an uncollectable judgment.

We had previously tried to work out a payment plan with the landlord (no rent reduction possible), but were unable to pay on that agreement as necessary. Hence, the eviction.

The lease mentions nothing regarding the landlord being able to lock us out and never uses the word destraint. However, I'm unclear on the "security interest" clause. Here's how it reads (this is a sublease, by the way):

In order to secure Sublessee's obligations hereunder, Sublessee hereby grants to Sublessor a security interest in all of Sublessee's Improvements, goods, inventory, equipment and other personal property of Sublessee which are or may be put into the Subleased Premises during the Term of this Sublease and all proceeds of the foregoing. Sublessee agrees to sign any financing statement requested by Sublessor to effect such security interest. The lien granted hereunder shall be in addition to any Sublessor's lien that may now or at any time be provided by law.

Is this the same as a distraint clause? How does this affect the inventory of the store?

When you're talking about the landlord are you talking about the owner of the building or the party from whom you sublet? The party from whom you sublet is the sublessor. The owner of the building is not the sublessor.

When you sublet did you sign anything other than the lease? Specifically, did you sign a financing statement? If you did then they have a security interest in the property that was listed in the financing statement. Basically, a security interest is the same as a mortgage. If you don't pay them then they can take the property, sell it and apply it to the amount you owe them. This is different from the right of distraint. But from what you've written here, the owner of the building does not have the security interest. Only the sublessor has the security interest.

Keep in mind that this security interest most likely only applies to property located at the leased premises. If you open for business in a new location then the security interest should not apply to any of your property there.

Yes, when I said landlord, I was referring to the sublessor. We have no direct relationship with the building owner. As far as we are aware, the sublessor is current with his payments to the building owner.

To answer your question, when signing the sublease, we did not sign any additional forms such as a financing agreement. Does this nullify any sort of security interest in the store's inventory?

Basically, we are trying to determine if the sublessor has any legal right to seize our property to offset our debt, and if so, will this legal right hold up if the store inventory is no longer on the premises?

Yes, he has the legal right to seize the property. The lack of a signed financing statement doesn't nullify that right.

If the property is at a different location then they would have to prove that it was the same property at the original location before they could seize it. But the way that would work is that they would seize it at the new location and you would have to sue them to force them to prove it was the same property at the original location.

Have you tried to find someone to take over your sublease? That might be a way out of your situation.

Also remember he can not "legally" lock you out, illegally landlords lock out renters a lot. One major one made the news here in Atlanta last month, it took almost a week for them to go though the courts to get the doors unlocked.

So remember they can't legally lock you out, but when you go down and the door is boarded up, what happens.

So, basically, if the inventory is not present, they would have to come looking for it, and be able to prove that it was here previously (which would be more or less impossible). It may be in our best interest to remove the things we want/need from the premises and allow the rest to be seized to help offset the debt.

Since an eviction is generally to remove a tenant who will not leave, does it matter if we leave voluntarily? Will this help to avoid court costs incurred by the sublessor filing for eviction, or does this not apply in terms of a commercial lease?

Finally, how long do we generally have until an eviction notice will be served and what happens at the point that we receive the actual eviction notice?

We have tried to find a partner to help us pay off the debts and allow us to remain in business, and we have also tried to find a buyer for the business to take over our space and let us pay off the back rent, but so far all these attempts have failed. Any other suggestions anyone could offer?

Thank you very much for the information you're providing, this is all new to me and I'm just trying to find out everything I can and determine the best possible course of action.

Quote:

Originally Posted by Fr_Chuck

Also remember he can not "legally" lock you out, illegally landlords lock out renters alot. One major one made the news here in Atlanta last month, it took almost a week for them to go though the courts to get the doors unlocked.

So remember they can't legally lock you out, but when you go down and the door is boarded up, what happens.

Chuck, thanks for the response. However, our sublessor now lives out of state and has no personal contact with our location - all of this is being handled by a local attorney's office and so I imagine that it's unlikely we will be illegally locked out (I should think that an attorney's office would know better than to come down and illegally lock us out, though I could be wrong.)

Quote:

Originally Posted by jdavis

So, basically, if the inventory is not present, they would have to come looking for it, and be able to prove that it was here previously (which would be more or less impossible). It may be in our best interest to remove the things we want/need from the premises and allow the rest to be seized to help offset the debt.

They're not required to seize them, sell them and apply them to the debt. In fact if you abandon them they can charge you for the cost of removing and disposing of them, or for the cost of storing them.

Quote:

Since an eviction is generally to remove a tenant who will not leave, does it matter if we leave voluntarily? Will this help to avoid court costs incurred by the sublessor filing for eviction, or does this not apply in terms of a commercial lease?

If you leave voluntarily you'd better make sure you put it in writing that you're leaving and hand deliver the keys. If you just leave without a written notice then a good attorney would advise them to file for eviction just to be safe. If you give written notice then you can save the cost of them filing for eviction and legal fees.

Quote:

Finally, how long do we generally have until an eviction notice will be served and what happens at the point that we receive the actual eviction notice?

That depends on how long it takes them to file and the type of backlog there might be in the court's schedule. It could be anywhere from one week to 2 months for the court to issue a trial date. Once the trial occurs the eviction notice could come anywhere from 3 days to 3 weeks later.

Quote:

We have tried to find a partner to help us pay off the debts and allow us to remain in business, and we have also tried to find a buyer for the business to take over our space and let us pay off the back rent, but so far all these attempts have failed. Any other suggestions anyone could offer?

Try sitting down with them to make a termination agreement. Maybe you can sign an agreement promising to make payments over a period in return for being let out of the lease.

Quote:

Thank you very much for the information you're providing, this is all new to me and I'm just trying to find out everything I can and determine the best possible course of action.

It's a tough time for everyone now. Good luck.