When foreclosing on a commercial building, why would the lender even consider removing a rent-paying tenant and terminating its lease? Here are thirty-two reasons why, in no particular order. Can you think of any others?
When foreclosing on a commercial building, a lender may remove a tenant from its premises and terminate its lease, if the tenant:
1. Is too small
2. Has poor credit
3. Has an image that is not conducive to the building
4. Uses its space in a manner that is inconsistent with other tenants in the building or is unlawful
5. Is in default of its lease
6. Vacates its premises
7. Damages its premises
8. Modifies its premises, conducts unauthorized demolition or construction within the premises
9. Adds unauthorized equipment to the premises
10. Draws excessive utilities or services from the building
11. Is difficult to deal with
12. Creates extreme or dangerous landlord challenges
13. Doesn’t adhere to building rules
14. Creates unreasonable costs for the landlord
15. Substantially increases the landlord’s insurance rates
16. Increases risk to the landlord and / or tenants
17. Draws negative attention to the building, landlord, and / or other tenants
18. Disturbs other tenants
19. Doesn’t pay its bills on time
20. Is the only tenant on a vacant floor
21. Is the only tenant, or one of few tenants, in a vacant building
22. Is in a location in the building that may impede the leasing program of the lender, a new landlord, or a prospective buyer
23. Is in the way of a larger or more desirable tenant
24. Might impede the lender or a new landlord’s ability to sell the building
25. Might impede the ability of the lender, a new landlord, or a prospective buyer to convert the building to an alternate use
26. Might impede the ability of the lender, a new landlord, or a prospective buyer to demolish the building
27. Competes with the lender, the new landlord, a prospective buyer of the building, or other tenants in the building
28. Pays below market rents
29. Has a lease that contains terms that could limit future financing
30. Has a lease that contains terms that might be unfavorable to the lender, a new landlord, a prospective buyer of the building, or other tenants in the building
31. Has a lease that contains rights and options that could limit future financing
32. Has a lease that contains rights and options that may be unfavorable to the lender, a new landlord, a prospective buyer of the building, or other tenants in the building
Are there more reasons? Let me know.
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Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to finance and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations. Under the leadership of its award-winning CEO, Andrew Zezas, RealStrat’s clients engage the firm when acquiring, disposing of, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America. By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.
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