Letters of Credit

Letters of credit have been in use for over two thousand years, in one form or another. From the time of ancient Greece and Rome up through the present, letters of credit have been mainly used to finance shipping contracts. However, letters of credit have uses that go far beyond just transportation. In a letter of credit arrangement, the issuing party, usually a bank or insurance company, contracts with one party to pay funds to a third party upon the fulfillment of certain conditions specified in the agreement. Most commonly, they are employed to finance a sale of goods where the buyer and seller have limited contact and experience with each other, such as an international transaction. Because letters of credit are employed so extensively in international trade, they are governed by an international treaty ("Uniform Customs and Practices Governing Documentary Credits"). But utility of letters of credit is not confined to international shipping; they can be quite useful right here in Virginia. A tenant can obtain a letter of credit which will become payable to the landlord upon a certification from the landlord that the tenant has defaulted on his rent. This arrangement has several advantages over a conventional security deposit. The landlord can demand a much larger security deposit in the form of a standby letter of credit than he could in cash, and the tenant does not have to use his valuable cash reserves to satisfy the security deposit, assuming the tenant has a reliable credit history. In addition, the tenant will not be at risk of losing his security deposit if a foreclosure occurs. *** The above is not meant to replace legal counsel. If you'd like to speak to one of the lawyers at Gross & Romanick, please call us at 703-273-1400 or fill out our online information request form.

Commonly Asked Landlord/Tenant Questions

In its commercial landlord/tenant practice, Gross & Romanick helps its clients with leases, evictions, self-help, bankruptcy, and litigation. Naturally, there are a number of issues that come up time and time again. Here are some of the most commonly asked questions:

QUESTION: If a tenant doesn’t pay its rent, can the landlord just lock the door?

ANSWER: The right of self-help does exist in Virginia in commercial landlord/tenant situations. But since there are serious constraints and risks, never attempt a self-help eviction without an attorney’s the assistance and approval. Some of the legal constraints can include the terms of the lease, breach of peace, and bankruptcy.

QUESTION: Can a landlord require the tenant to pay its attorney's fees, even if a lawsuit has not been filed?

ANSWER: The Lease and other written agreements between the landlord and tenant will determine this issue. A tenant must have signed a very carefully crafted lease provision allowing attorney's fees, even when suit is not filed. In fact, many landlords are losing these legal fees when they are forced to file litigation and defend countersuits because insufficient attention is being paid to the attorney fee provisions of many leases.

QUESTION: Can a landlord seek possession of the premises and sue for rent at the same time?

ANSWER: Yes. Except in very rare circumstances a landlord should include a suit for monetary damages at that same time that it files for eviction. The General District Court, which normally can only enter judgments up to $15,000, can enter a judgment for any amount of money so long as possession of the property is at issue in the same proceeding.


If you are a commercial landlord or tenant and need legal counsel, please contact Gross & Romanick today.