How to Promptly Reclaim Abandoned Leased Premises
Generally, when a property owner in California wishes to terminate a commercial tenancy and reclaim the leased premises due to a tenant’s failure to pay rent, the owner must initiate an action for unlawful detainer to evict the tenant. As a result of the COVID-19 Pandemic, however, the State of California and many local jurisdictions have enacted emergency measures that strictly limit, if not fully abrogate, a property owner’s right to evict a tenant for extended periods of time. (See Wendel Rosen Commercial Lease Dispute & Resolution Team article on current barriers to commercial evictions here.) However, California law provides another procedure that may allow a property owner to promptly terminate a tenancy and reclaim the leased premises, even during the Pandemic, when a tenant not only stops paying rent but also reasonably and genuinely appears to have abandoned the premises during the tenancy term.
Examples of circumstances that might provide a landlord with a reasonable basis to believe that a commercial tenant has abandoned the premises might include: terminated utility services, the accumulation of unopened mail, empty store or office shelves, the removal of furniture and equipment, as well as the tenant’s repeated failure to respond to the landlord’s phone calls, emails or letters. A landlord would be well advised to keep detailed records of the circumstances that give rise to the landlord’s belief that the tenant has abandoned the premises, including records of the efforts the landlord made to get ahold of the tenant.
California Civil Code Section 1951.35 provides that commercial real property shall legally be deemed to have been abandoned by a tenant, and the tenancy shall terminate, if the landlord gives the tenant formal written notice of the landlord’s belief that the tenant has abandoned the premises in accordance with the procedures set forth below, and the tenant does not timely respond and rebut the landlord’s belief. If the landlord follows these procedures, then in order for a commercial tenant to avoid having its tenancy terminated before the end of the lease term, the tenant must timely respond by giving landlord written notice that the tenant does not intend to abandon the premises, and the tenant must provide the landlord with an address at which the tenant may be served by certified mail in an action for unlawful detainer. Civil Code Section 1951.3 provides a similar procedure for residential tenancies, but the focus of this article is on commercial tenancies.
Pursuant to Civil Code Section 1951.35(c), a landlord may give the tenant formal notice of the landlord’s belief that the tenant has abandoned the premises (“Notice”) only when the rent on the property has been due and unpaid for at least the number of days that are required for the landlord to declare a rent default under the terms of the lease, but in no case less than three days. The landlord must also have a reasonable basis to believe that the tenant has abandoned the property, aside from the mere non-payment of rent. The landlord must have the Notice personally delivered to the tenant, or send the Notice to the tenant by a “recognized overnight carrier,” or by first-class mail, at the lessee’s last known address. The tenant’s last known address may be the leased premises itself, but that is not always the case. If there is reason for the landlord to believe that the Notice will not be received by the tenant at the tenant’s last known address, then the landlord must also send the Notice to any other address that is known to the landlord where the tenant “may reasonably be expected to receive the notice.” The Notice must be in substantially the same format that is spelled out in Civil Code Section 1951.35(e).
Once the landlord has duly delivered the Notice to the tenant, the tenant must respond on or before the deadline specified in the Notice by informing the landlord in writing that the tenant does not intend to abandon the premises. The tenant must also provide the landlord with an address at which the tenant may be served by certified mail so that the landlord can file and serve the tenant with a lawsuit for unlawful detainer in the event that the tenant does not immediately pay the landlord the past due rent. If the tenant does not timely provide the landlord with this information, then the tenant shall automatically and legally be deemed to have abandoned the premises, even if the tenant did not truly intend to abandon them.
Once the premises are legally deemed to be abandoned, the landlord may enter the premises and secure them by changing the locks and any security or alarm codes. The landlord should then take the time to inspect the premises for damages caused by the tenant. If the landlord discovers that the tenant has left inventory, equipment, supplies, and/or other personal property behind, under Civil Code Section 1993 and several related code sections, a commercial landlord is required to serve the former tenant with a Notice of Right to Reclaim Abandoned Property (“Reclamation Notice”). A tenant has 15 days after the Reclamation Notice is personally served, or 18 days, if served by U.S. Mail at the tenant’s last known address, to reclaim the abandoned personal property and pay the landlord the reasonable cost of storage. The landlord can prohibit the tenant from claiming the property until those costs have been paid.
If the tenant does not claim the personal property in time and the landlord reasonably believes that the abandoned personal property is worth less than $2,500, or an amount equal to one month’s rent and charges for the premises (whichever amount is greater), then the landlord may keep, sell, or destroy the abandoned personal property after the reclamation period expires, without giving further notice to the tenant. If it is reasonably clear that the value of the abandoned property is above these thresholds, then the landlord must hold a public auction sale of the abandoned personal property after publishing the date, time, and place of the sale in a local newspaper with general circulation at least five days before the sale. The tenant may still reclaim the personal property any time before the sale, but the tenant must pay for the costs of storage up to that point, as well as the landlord’s costs of advertising the sale.
California Code of Civil Procedure Section 1988 provides that, after the sale, the landlord may use the net proceeds of the sale as reimbursement for the costs of storing the property and advertising the sale, but the landlord must turn over any remaining money to the treasury of the county, where the tenant can claim the proceeds for up to one year.