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Tuesday, June 10, 2008

Residential Versus Commercial Tenants

Gross & Romanick publishes a number of articles on their website about their various practice areas: Bankruptcy; Business Law; Commercial Landlord; Construction Law; Litigation; Personal Injury; Technology Law; and Traffic/DWI.

Here’s an article from the Commercial Landlord section:


Residential and Commercial Tenants: Do Not Treat Them the Same!

All leases are not created equal. Commercial leases are generally governed by the specific terms of the lease agreement between landlord and tenant, but Virginia law automatically merges certain statutory terms into every residential lease. The Virginia Residential Landlord Tenant Act gives residential tenants considerably more rights than are afforded to commercial tenants.

Evictions

The differences between residential and commercial leases are most starkly apparent when a landlord attempts to evict a defaulting tenant. Commercial landlords have rights of self-help; they can, under proper circumstances, simply lockout non-paying tenants (as long as this is done with great care - see Edward Gross Report, Spring 1992). Residential landlords, however, have no such remedy. The Virginia Code Section §55.248.36 provides that "Landlord may not refuse to permit tenant access to a unit unless refusal is pursuant to a court order." Furthermore, a residential landlord is also forbidden from denying essential services to his tenant, such water, heat, or electricity, in an effort to force out that tenant. Residential tenant must be served with a 5 day "pay or quit" notice before eviction, but no such notice is required for commercial tenants (we recommend serving notice on both types of tenants).

Duty to Maintain

A commercial landlord has no duty to maintain the premises during the lease term; repairs are the responsibility of the tenant. Of course, both commercial landlords and tenants can, and often do, specifically contract to impose a duty to repair upon the landlord, but no such duty is implied in law. Conversely, the Virginia Residential Landlord Tenant Act imposes a specific affirmative duty on every residential landlord to maintain and repair the premises throughout the term of the lease. A residential landlord must keep all common areas in a clean and safe condition, must maintain all plumbing and heating, sanitary facilities, and any appliances on the premises. A residential landlord also has a general obligation to keep the premises in a "fit and habitable" condition. These duties can be transferred to the tenant, but the transfer must be in writing and done for a "good faith" purpose (something other than just an attempt by the landlord to evade his obligations).

Security Deposits

In commercial settings, the amount and disposition of security deposits are generally governed by provisions of the lease. The lease will spell out for what purposes it can be used by the landlord, and when and how the security deposit is to be returned to the tenant. Residential landlords, on the other hand, must comply with Section §55-248.11 of the Act, which provides detailed procedures and rules governing the use of residential security deposits. Among its provisions, the Act mandates that a residential security deposit cannot exceed more than two month's rent; and the landlord must provide interest at five percent per anum payable to the tenant upon termination of the lease (if the deposit is kept for over thirteen months).

The residential landlord may apply the security deposit only to the payment of accrued rent (with attendant late charges), and to offset damage to the premises caused by the tenant. The landlord must inspect the premises for damage within 72 hours from the time the tenant vacates, and the tenant has a right to be present during the inspection. After making deductions for damage, the landlord must return the remaining portion of the security deposit within thirty days after the termination of the tenancy, along with a written itemization of the damages to which the deposit was applied. If the landlord fails to comply with any of these provisions, the tenant may recover from the landlord the security deposit plus any actual damages and reasonable attorney's fees.

In the Fall, 1991 edition of the Edward Gross Report, an article discussed the possibility of losing a security deposit after foreclosure. In fact, this only applies to commercial tenants because Virginia Code Section §55-248.11 states: "The holder of the Landlord's interest at the time of termination of tenancy regardless of how that interest is acquired or transferred...shall be required to return any security deposit received by the original Landlord."