Restaurants are bound by commercial landlord/tenant laws, which vary, in some cases sharply, from the residential laws regarding leased property. In many cases, the actions allowed by commercial property owners are strictly based upon the terms of the lease agreement. In some jurisdictions, distraint (including the legal locking out of a commercial tenant) is permitted even if the subject is not explicitly referenced in the lease.
Cause for Lockout
Distraint can be invoked against restaurant owners and other commercial business owners to recover unpaid rent. All other breaches of a lease agreement are not legitimate reasons to lock out a tenant unless otherwise provided in the lease. The lease can prescribe the locking out of a commercial tenant for any reason as long as the lease is presented to the court with evidence of the breach. The property owner is responsible for locking the premises as a first step toward forced recovery of rent payment arrearages. Locking the tenant out of the property is employed to prohibit the tenant from removing goods that could later be sold to recover past due rent.
Parameters of Legal Distraint
The commercial property landlord or owner can lock the restaurant owner from the business before the court has been petitioned for recovery of past due rent. Upon the landlord's filing of a Petition of Distress, the restaurant owner receives notice of the seizure and has a period of time to contest the distraint. If the owner does not file a counter petition to contest the seizure, the property within the business should be inventoried, appraised and eventually sold. Jurisdictions vary as to the amount of notice required and the time allowed for the tenant to contest the distraint.
Remedies for Tenants
Tenants can file to contest the seizure of their property with the district court. In some jurisdictions, there are penalties for unlawful distraint as well as penalties to the tenant for contesting a lawful seizure. In New Jersey, the penalty for unlawfully locking out and/or selling a business owners goods is two times the damages incurred by the tenant. The penalties for contesting a lawful distraint is twice the cost of seizing, appraising and selling the goods, to be paid by the tenant.
Lease Agreements
Aside from local jurisdiction statutes, a restaurant owner can be locked out of the business for failing to pay rent or any other breach of the lease agreement provided the lease specifies the breach and lists distraint as a valid means for recovery by the landlord or property owner. The landlord does not need to file a Petition of Distress against the tenant to sell the goods seized if permitted by the lease.
Tags: lease agreement, restaurant owner, business owners, commercial property, commercial tenant, contest distraint