The landlord retains the right to receive rent from a tenant under the lease even after the tenant has moved out. Owing back rent after the lease expires can be devastating and owing money to the landlord after you move out is never an enjoyable experience.
Tenants may find themselves owing multiple months of missed rent or partial payments. Miscalculations could significantly impact their cash flow and future endeavors. This is more common in commercial leases because commercial landlords often won’t send out notices for rent increases. These escalations can often get overlooked if the tenant has not done a proper lease abstract. The Lease is the only truth.
It is a difficult situation for both tenant and landlord. Often in commercial leases there is a “No-Waiver Clause“. This clause prevents the landlord from waiving their rights or remedies under the lease. This means that even if the landlord doesn’t enforce the correct rent, they still maintain the right to collect it.
Francis J. Slavin Law Firm explains it well from the landlord’s perspective here: What should I do if my commercial tenant is not paying rent? | Francis J. Slavin Law Firm (fjslegal.com)
Another perspective from Sapling.com:
Can a Landlord Sue for Back Rent After You’ve Moved Out? (sapling.com)
Considerations and Consequences of Owing Back Rent
Owing back rent to your landlord could result in the loss of reputation. This may stall your plans of future growth and may lead potential landlords to the wrong conclusions on how you conduct business. Make sure that rent is paid accurately and on time to better your business’s reputation. Know your lease!
Percentage Rents
Whether you’re obligated to pay percentage rents after your lease expires depends on the terms outlined in your lease agreement. In many cases, percentage rent obligations cease once the lease term ends. However, some leases may include provisions for continued payment of percentage rents during holdover periods or if there are ongoing obligations related to the leased premises after the lease expires. It’s essential to carefully review your lease agreement and consult with legal or real estate professionals for specific guidance tailored to your situation.
Owing Back Rent and your ability to exercise an option.
Consider your ability to renew your lease or exercise an option when dealing with back rent. Most landlords require rent payments to be up to date before renewing the lease or exercising an option. This means you may need to pay a significant sum to catch up on rent in order to renew the lease, especially if your location is profitable.
Back Rent and Franchisees
For franchisees, owing money to the landlord and being unable to exercise an option can have repercussions with the franchisor. Losing a location due to rent issues may result in the franchisor losing trust in you and being hesitant to grant additional locations.
Please note: The information provided here is not legal, financial, or any other form of professional advice. When faced with the possibility of owing back rent, seek professional legal counsel from a real estate attorney who specializes in commercial lease agreements.
