Friday, March 27, 2009

Request For Notice?

I went to a Real Estate continuing education class recently. This particular class was at the Arizona School of Real Estate and Business, and one of the presenters was Bill Gray, who used to own the school.

I can always be sure that if he is around, I’m very likely to learn something interesting. This particular class was no exception, since another one of the presenters was an attorney who I think created Done Deal Solutions’ business model of doing short sale flips. (More on this in a future post)

The class was a sell out, at $50 a seat, and was worth every penny. There were several other presenters, and all were very good. The first presenter was Diane Drain, a foreclosure attorney. Among other things, she talked about a little known portion of the Arizona Revised Statutes which permits anyone to record a notice at the county recorder’s office which has the effect of notifying whoever is specified in the document as to a number of bad things which may later be filed against a property, such as liens, notice of foreclosure, trustee’s sale, conveyance of the property, and the like.

In particular,

ARS 33-809. Request for copies of notice of sale; mailing by trustee; disclosure of information regarding trustee sale

A. A person desiring a copy of a notice of sale under a trust deed, at any time subsequent to the recording of the trust deed and prior to the recording of a notice of sale pursuant thereto, shall record in the office of the county recorder in any county in which part of the trust property is situated a duly acknowledged request for a copy of any such notice of sale. The request shall set forth the name and address of the person or persons requesting a copy of such notice and shall identify the trust deed by setting forth the county, docket or book and page of the recording data thereof and by stating the names of the original parties to such deed, the date the deed was recorded and the legal description of the entire trust property…

So why is this useful? There are several reasons. First, if there is a property you might be interested in buying, and you think the owner might be having problems, you could record this request and get notified when they are really in trouble.

Second, and more important, if you are renting or leasing a property, it might be nice to know that your landlord is about to lose the property. A foreclosure wipes out your lease – and if you weren’t privy to what troubles they were having, your first notice might be the sheriff showing up to evict you.

Finally, as a Real Estate licensee (so only about half of the population of Arizona need worry about this one!) it might be a good idea to file this notice on any listing you have that is for longer than 6 months, especially if it is an absentee owner. The property might go into foreclosure during the listing period. Probably would be something you want to know, if it is your listing.

Filing a Request for Notice is another interesting tool to keep in your arsenal, something which could protect you or your clients (if you are a licensee), and could make a huge difference to your business! the meager recording fee makes it cheap insurance.


Thursday, March 26, 2009

Unwavering Tenants—Secure in their Places

Recently I've noticed an imbalance in the "landlord-tenant" mix of my posts; it seems like I’m biased toward the landlord's issues and concerns in leasing disputes. To redress the inequity, this post is for you tenants.

One of the critical portions of reviewing a commercial lease is the need to be careful about what a tenant is being asked to give up, especially in the area of statutory rights. And I've become extra-sensitive to a commercial tenant waiving any defense of the statute of limitations in regard to potential landlord claims. The cutting board is A.R.S. §33-361; there, without notice, a landlord has the right to take possession of the premises when 5 days lapse after the due date for any rent installment--with or without "process." The process referred to there, of course, is a suit for forcible detainer. And that summary proceeding is the subject of this post.

"Forcible detainer" occurs when the tenant remains in the premises after the landlord has demanded possession be turned over (which usually occurs when there’s been a payment default or a material, non-monetary default); but under §33-361, the landlord doesn't have to give a warning or make a demand for physical possession of the premises before filing the detainer lawsuit. Under this statute, forcible detainer seems to arise on day 6 following the date the rent installment due. Forcible detainer is a sticky wicket for a tenant because he or she can assert just one of these three defenses:

1. There's no lease--hence, no landlord-tenant relationship; and, therefore, there's no right-of-possession issue to try before the Superior Court Commissioner.

2. I did too pay rent and comply with the lease! Plaintiff's lying about my default, and I have the proof!

3. The statute of limitations for forcible detainer has run.

4. The non-monetary default asserted by the Landlord is insubstantial, and therefore the tenant cannot be evicted.

Okay, so when does the first defense exist? Not often, but the case to review to understand this is RREEF Mgmt. Co. v. Camex Prods., Inc., 190 Ariz. 75, 79, 945 P.2d 386, 390 (App. 1997). The second defense rarely will be available; no plaintiff would waste lawyer fees to tell a court a tenant didn't pay rent or perform some other lease obligation if it was untrue. The statute of limitations (2 years under A.R.S. §12-542) begins to run, I believe, on "day 6 after the rent due date"; occasionally, though, landlords lay in the weeds for a few years before, using this detainer process, they try to recover possession, back-due rent and attorneys' fees. Why roll this way? Well, there are no substantive defenses permitted the tenant defendant, like offsets or landlord denial of quiet enjoyment, that the tenant can introduce at the trial. Our appellate decisions admonish that defenses (other than those numbered above) aren't supposed to be interposed in the interest of summary adjudication of the landlord’s right to possess the premises under the forcible detainer proceeding, starting with Old Bros. Lumber v. Rushing, 64 Ariz. 199, 205, 167 P.2d 394, 400 (1946).

This can become an ugly business, if the tenant waives her right, at the time she makes the lease, to assert a statute of limitations defense. In a five-year lease term scenario, the plaintiff could sit on its hands if the tenant fails, use minimal efforts to mitigate its loss of rents, and then, at year 4.9, file a detainer action and ask the court to grant a judgment for back rent for the whole period after the tenant’s failure. And the tenant can't raise any defense to the claim for back rent—but could argue that the lease had terminated more than two years before the date the detainer suit was filed. Except, that is, if the tenant waived that defense that the landlord has waited too long to bring his action. Tenants should read their leases carefully to make certain they are not waiving a defense of the statute of limitations for forcible detainer proceedings. While tenants should pay their obligations like anyone else, they also should be able to present any evidence in the proper forum that would excuse some portion of their obligation.

Wait, you ask—didn’t you say there’s only three defenses? Then what about item no. 4 above? Okay, that’s the defense available as a result of this Arizona Supreme Court decision. Foundation sent Loehmann's a bill for its common area proportionate share; Loehmann's claimed it was too high; Foundation explained that another tenant had moved out, increasing Loehmann's percentage of common area; so Loehmann's sent payment, but three days later than the last landlord demand letter specified. Foundation used the text of A.R.S. § 33-361(A) to assert that the law allows for termination and repossession upon any breach. Commercial landlords will not be allowed to repossess for any breach, no matter how trivial, said the court, because a lease is not only a contract but also a conveyance, with modern legal trends viewing it more as the latter. Common law sought to stabilize economic development by not allowing repossession for trivial breaches. The Arizona legislature surely didn't mean to allow repossession for any minor breach--complicated, modern transactions make it almost impossible not to commit some minor breach along the way. Got it? Think that the Court Commissioner with 25 detainer actions on her afternoon’s docket is up for a tenant’s analysis of how Foundation Development Corp. v. Loehmann's, Inc., 163 Ariz. 438, 788 P.2d 1189 (1990), applies to her facts? Tenants—yield not your defenses!


Wednesday, March 18, 2009


A colleague recently asked me what I thought about the proposition that the attempted conveyance of real estate to a non-existing entity (the “owners” holding themselves out to the world as having organized an LLC) would be void. I shared with him my thought that Arizona LLCs fundamentally are “incorporated partnerships.” Besides the fact that the same agency governs the two forms of entities in Arizona, and that many of the organizational statutes in the two schemes (corporations and limited companies) are parallel, I observed that the same ‘sanction’ exists against those faking their “organization” as either entity type.

A.R.S. §10-146 (the Corporation Code) provides:

"All persons who assume to act as a corporation without authority so to do . . . shall be jointly and severally liable for all debts and liabilities incurred or arising as a result thereof.”

A.R.S. §29-652 (the Limited Liability Company Act) provides:

“All persons who assume to act as a limited liability company without authority so to do are jointly and severally liable for all debts and liabilities incurred by the persons so acting.”

Since the de facto incorporation doctrine in Arizona was abolished by A.R.S. §§10-056 and -146, according to Booker Custom Packing Co. v. Sallomi, 716 P2d 1061, 1063 (App. 1986), it’s hard to imagine that our courts would support the idea of a de facto organization of a limited company, especially when the threshold for getting organized is so low. An LLC is formed in Arizona when the articles of organization are delivered to our corporation commission for filing (A.R.S. §29-635); they don’t even have to be processed or approved by the government for the company to exist—and the form at the counter of the corporation commission is a whole page long. (Now the “existence” could be short-lived if there’s no compliance, post-filing, with the statutes, but I’m talking here about the ease of preparing for the “opportune moment” even in a few hours time.)

Do not accept title to, lease or mortgage property, grant an easement or do anything else—at least, not with realty, until you’ve filed your organizational papers, no matter what a rush you feel you’re facing. Your deal will be dead, I predict, with respect to the fictional “entity.” I doubt the argument that the LLC’s management can resuscitate the deal by ratifying the prior act after its formation can succeed. Why? Another state that abolished its de facto incorporation doctrine, Minnesota, recently had its Court of Appeals trash a conveyance of real estate to a pseudo-LLC. In Stone v. Jetmar Properties, LLC, 733 N.W.2d 480, 486-87 (2007), the court said that deeds cannot be delivered to non-existent entities, so it voided a deed purporting to convey property to an “unregistered” LLC. That Court of Appeals would not allow the wannabe conveyance to be characterized as a future interest, either; so the grantor continued to be the owner of the property. Minnesota’s courts aren’t alone in its conviction. See, for example, Kiamesha Dev. Corp. v. Guild Props., 4 NY2d 378, 389; Belcher Ctr., LLC v. Belcher Ctr., Inc., 883 So 2d 338 (Fla. App 2004); Julian v. Peterson, 966 P2d 878 (Utah App 1998), cert denied, 982 P2d 88 (Utah 1999); Roeckl v. Federal Deposit Ins. Corp., 885 P2d 1067 (Alaska 1994). If all these courts don’t approve an attempted pre-formation transfer of assets, I don’t like the odds that Arizona will, either, when the time to rule on this issue arrives.


Wednesday, March 11, 2009


I’ve been reading long, gas-baggy recorded documents like Declarations of Easements and Restrictive Covenants for so long that my eyes instinctively roll back, revolting at their recognition of the familiar stack of paper. These instruments are particularly prevalent in shopping centers and office and industrial parks, and mixed use projects that incorporate varieties of commercial product types. They mandate owner maintenance and repair, cleanup after a fire or other casualty, insuring each lot’s common area, and other assorted obligations pertaining to their respective parcels. The declarations customarily make, courtesy of the Declarant, dire threats for non-compliance with this and that obligation, including an owner’s failure to reimburse the Declarant or another intervening owner (called an “intervenor” here) if it must step in and do the work of maintenance, repair, cleanup, payment of delinquent taxes or special assessments, affording of liability insurance, and so forth. The instrument typically provides that the failure to reimburse the intervenor for fixing the mess neglected by the uncooperative or disengaged land owner will constitute grounds to impress a lien for reimbursement against the miscreant’s parcel that “may be foreclosed in the manner of a mechanic’s lien.” Here’s one illustration:

Any sums remaining unpaid in accordance with Article [number] or Section [number], together with interest calculated at three percent (3%) above the prime rate charged by Wells Fargo Bank, N.A., or any successor thereto, or at the then-highest annual interest rate allowed by law (whichever is less), may be secured by a lien on the parcel of the owner in default and may be perfected in accordance with the laws of the State of Arizona, which lien shall retain the priority of title of this Agreement and may be foreclosed upon within one (1) year of the date that the lien is perfected.

Sounds awfully impressive, even though that text fails to describe the type of lien contemplated. I’m thinking, however, that this is wholly unenforceable claptrap, noble statement of remedial purpose notwithstanding.

Item First: the manner of lien perfection goes unexpressed, perhaps with good reason. There are only two means in Arizona to perfect a lien on commercial real property (excluding fixtures filings, and a certificate of purchase creating a lien for the repayment of “funded” real property taxes and assessments) validly held by a non-governmental entity—via the mechanic’s lien statutes and the mortgage/trust deed statutes. I can dispose of the latter avenue for a wannabe lien in a few words. A consensual lien against real property must be signed by its owner or someone authorized by law to do so on behalf of that owner. Merely participating in a larger development of property governed by CC&Rs--however assertive these may be--does not constitute a grant of authority by a land owner sufficient to constitute an intervenor his attorney-in-fact to legitimize recording a foreclosure-worthy, mortgage-type lien.

Item Second: One assumes, since there’s no “proxy deed of trust” available to a fellow owner in a “restricted” commercial development, that someone contemplated a lien like that perfect-able and executable under our State’s mechanic’s lien regime found in Chapter 7 of Title 33 of the Arizona Revised Statutes. On the surface, one further assumes that the aggrieved intervenor procedurally first records a Notice and Claim of Lien, followed by a suit to be brought within the period set forth in the Declaration after the date of recording that Notice. Whoops. Apollo 13 to Houston—we have a problem.

Issue One: The mechanic’s lien statutes [A.R.S. §33-992.01(B)] require, “as a necessary prerequisite to the validity of any claim of lien,” that a preliminary 20-day notice be served upon the owner, any general contractor or any construction lender. See also A.R.S. §33-981(D). There’s one, tiny, very limited exception to this requirement—the subcontractor who’s physically out on the parcel where the work is being done. So say the declaration requires, in the event of casualty, that the affected owner of that damaged lot has to make repairs or “scrape the improvements” to eliminate an eyesore. If the neglectful owner doesn’t do it, and the intervenor takes care of the matter, unless the helpful owner was physically performing the work on the lot himself, there’s no mechanic’s lien enforcement rights, no matter what the declaration says. Have a look at Performance Funding, LLC v. Arizona Pipe Trade Trust Funds, 203 Ariz. 21, 49 P.3d 293, a 2002 Arizona Court of Appeals decision, for the (currently) final word on that limited exception to satisfying the state’s 20-day notice service statute.

Issue two implicates the timing aspect of the enforcement of the wannabe lien described in the declaration; while the CC&Rs drafters can choose any deadline they wish by which the intervenor can pursue reimbursement against the miscreant owner, Arizona courts won’t indulge the claimant unless he hews to the mechanic’s lien enforcement deadline—assuming that the intervenor even gets that far, which I doubt it will. In Arizona Department of Water Resources v. Rail N Ranch Corporation, 156 Ariz. 363, 752 P.2d 16 (1987), our Court of Appeals filleted DWR when it tried to foreclose, after two years had lapsed, under a wannabe lien under a state statute providing that “the [department’s] lien shall have the force and effect of a mechanic’s lien” and “may be foreclosed in the same manner.” Yeah, sure, ruled the court—even if Arizona’s legislature can “incorporate by reference” certain provisions of the mechanic’s lien statutes, DWR doesn’t get to substitute its own period of limitations on enforcement, inconsistently with the “incorporated” statutory scheme. If you don’t file your suit within 180 days after recording your lien claim, as the mechanic’s lien enforcement statute provides, you’ve snoozed too long. (Note, however, the appeals court did not declare the DWR lien to be void from its inception; it just dismissed the department’s untimely enforcement of its purported lien.)

Issue three is whether it’s fantastic to believe an intervenor can use the lien rights in Chapter 7 of Title 33 at all. You don’t have to be a licensed contractor to avail yourself of the right to lien under A.R.S. Sections 33-983(A) or -987 (subject to compliance with the 20-day notice, etc.) for this fundamental reason: Both statutes provide that “a person who labors” upon someone else’s lot can impress a lien. The words “contractor” and “subcontractor” and “architect”—licensed persons, appear throughout Chapter 7; so the legislature understood the distinction between licensed and unlicensed individuals and companies. That is what the Court of Appeals held in Performance Funding, LLC v. Arizona Pipe Trade Trust Funds; the union’s funds did not have to be licensed to impress the lien, although they could not enforce what they filed.

So can you do something about this CC&Rs mess, and breathe life into what seems an unenforceable provision in your declaration? Well, do you need to do anything more in Arizona, if, as declarant or another owner subject to the CC&Rs, the intervenor can obtain a money judgment on a claim of failure to reimburse, and can record that judgment lien against the miscreant owner, to encumber its title until the intervenor is paid? It is not sufficient just to let a “declaration lien” (assuming the intervenor records an instrument reciting in the lien notice that it is based upon A.R.S. Sections 33-983(A) or -987, and that service of the 20-day notice was appropriately done, together with the text of the declaration) ride as a cloud on title to the other owner’s property. Under the common law, once the lien is stale (after six months without filing suit), it will be deemed unenforceable—and becomes a “groundless lien” under the provisions of A.R.S. Section 33-420.


Saturday, March 7, 2009

Insurance companies, Bank safety

As the credit crisis started to unfold, one of the first things we really noticed was the AIG bailout. What I didn’t understand was what sort of exposure AIG had to the credit crisis; I didn’t realize that they had written insurance for the “CMO”s (Collateralized Mortgage Obligations, or, toxic debt wrapped in Christmas paper) and that as these CMOs crashed, AIG was obligated to pay on the loans.

Recently an insurance agent called and wanted me to switch companies, to another insurance company. The particular company he recommended was one which has been in the news as having some problems. This got me to thinking about insurance companies, and how their business model works.

An insurance company collects payments from customers, betting that they won’t have any claims. They take this money and invest it carefully, and make a return on the premiums. With lots of clients, and accidents being fairly rare if the company manages the risk carefully, the investment returns make lots of money for the insurance company.

What happens when the insurance company’s investments all go in the tank, as they are now? How hard is it for an insurer to “cook the books” and show their invested capital at the price they paid for the investment, rather than the current value? What happens when the capital is invested in T-Bills (which are paying near a 0% return now) – how does the company stay in business?

The agent told me that the stock price and profitability of the company does not affect the stability of the company to pay claims. I’m not so sure. The stock price reflects the confidence the public (and institutions!) have in the business; the profitability affects the stock price. If a company is not profitable for an extended period, they will not survive. This would seem to me to affect their ability to pay claims.

I remain unconvinced that the people running and rating these companies may not know what problems they really face. It has been reported that the leaders of some of the institutions that were taken over by the Fed had just previously stated that their institution was in fine shape! They don’t know that their own house is on fire, possibly because of the depth and intricacies of the web spun to make all the debt smell good. So even if an institution is well rated, in my opinion, if the stock price has crashed (I don’t mean cut in half, more like it is into the pennies), and especially if the government has bailed them out, then I would be very careful about using them as my insurance company. Make your own decision.

In the interesting financial times we face, assumptions we have always made are coming unraveled. One example is that the cash value of a money market account fell below $1 – an account that was supposed to be completely safe, just cash in the bank, lost value last year. I don’t think that has ever happened before.

The times we are in now are different from the great depression. Then, there was not much home ownership. Until recently, most families’ biggest and most important investment was in their home. Now, with home prices continuing to fall and unemployment rising, we have similar conditions to the great depression, plus we have a loss of 401K equity and home equity. I fully expect this depression to be far worse than the great depression. Many of our assumptions, things we have known to be true for many years, are proving to be wrong, and many more will be.

It is time to look closely at those things that are the most important to us and be sure we really understand what is happening.


I wrote this last week, before we saw Citibank shares fall below a dollar, and before we heard that the FDIC might be insolvent. For more than a year I have been saying that, if you have more than $100,000 cash be sure it is in separately named accounts (the limit since was raised to $250,000). However now it seems like even that isn’t good enough to protect your assets.
A good friend of mine who is a financial advisor keeps most of his clients’ money offshore someplace in a small, safe bank that does not make loans. (I don’t know the details of this arrangement, but I’m sure there are fees involved). He told me about this about a year ago, and I though wow- that’s excessive! Turns out he was not far off. Of course he has been just about right on most everything he has told me.

While sitting in cash might be attractive, and it might make you feel safe, it might not be so safe – I expect that if you have $10,000 in one bank you will be fine. But people with substantial cash hoards will want to evaluate just where their funds are kept and maybe even convert some into gold or silver and bury it in the back yard! I’m not usually an extreme sort of person, but this economy has me a little worried. Other than 401K, IRAs, and other retirement vessels, I think most Americans have little exposure to the stock markets. So the event of a market crash has little immediate effect on them.

It is the economy downturn which affects everyone. I am a part owner in a small restaurant in Phoenix, and I have watched the business go from fair, to bad, to worse, as the economy turns down. Many talented people are on the street looking for work, and taking whatever they can get. And, as a real estate agent I have seen my business drop off significantly since about July.
It is these sorts of events which will affect everyone. When the credit crisis started, credit dried up. This stopped investors, slowed growth. As a result the economy slowed. As the crisis deepened, psychology started to play a role – investors will wait and see rather than spend money to develop something. Many investors were hurt because most commercial real estate and development loans are short term – if a project takes too long, you have to refinance. And even established projects require refinancing. But no financing was available.

This monster feeds on itself – now no one even wants any credit – investor cash is on the sidelines waiting to see what happens. It is self-fulfilling.

When will we know it is at a bottom? Sir John Templeton said that market tops come when people are irrationally exuberant, and market bottoms occur when there is the greatest distress and fear. We aren’t there yet, I don’t think. Most likely the first thing we will see is an upturn in the stock markets; the market almost always presages the economy. Market crash, economic crash. Market rally, economic rally. The thing is, we could see some big rallies in the days ahead which are bear market rallies and not the start of a bull market. It is interesting that one segment doing well right now is firearms manufacturing. As long as this keeps up I think it is a bearish sign.

So my whole point here is that you should be very careful with your cash. I note that Scottrade, the brokerage I use for most of my trading, is insured by SPIC and further insured by Lloyds of London (which appears to be in trouble, about to be partially nationalized). I don’t know how solvent SIPC is, and I am concerned. But not enough to bury gold in the back yard (yet)!


PS My brother sent me this link showing Ron Paul talking about this mess. One of the few voices of reason, in my opinion.

And here is a link to a [THREE HOUR] video talking about how banks work. It is worth every single minute and I highly recommend you watch it. It is a HUGE eye opener.

Monday, March 2, 2009

Commercial Landlord Foxtrot

This is a time for calm. The Foxtrot, in ballroom parlance, is a “smooth” dance, noted for its elegance and artistry. Here are some reflections on how thoughtful landlords might think and proceed gracefully, navigating shoals littered with face-planted brothers and sisters.

One: We’re all in this together. There are no tactics that will guaranty successful commercial projects in uncertain financial times. But here’s one fundamental: A well-tenanted project not only shows well to new prospects, it flows better, cash-wise. So, a landlord must take a long view toward reducing tenant failures. That’s right—I’m suggesting viewing your tenants as your co-conspirators opposing your creditors, instead of seeing your tenants as your enemies. No tenants = no cash flow = no mortgage payment. It’s not a complicated formula. Think constructively, and abandon yanking out the hacksaw to mangle away a partly-functional limb.

Two: Appreciate that tenants are not all alike. Super-regional and national tenants are not motivated the same as “moms and pops” enterprises. Prepare for entirely distinct types of conversations with the principals of the two types of tenants. Larger tenants with multiple units (offices/stores) make decisions based on market forces that often have little to do with your particular project or its productivity there. Consider bank branches, or electronics stores—they may be doing well in your center but still tank. So if your multi-unit tenant is thinking of closing fewer than all its locations, ponder this: what will cause them to stay open in your project?

Three: If your center is financed, read your loan documents carefully, especially the loan agreement, the deed of trust and, if separate, the assignment of rents. Look for rays of hope that you may be able to renegotiate rent terms without having the lender interject its point of view; in these times, lenders may not be making profoundly wise decisions. The institutional lenders, they say, have their own sets of issues. Often, for example, the loan documents say that “major” tenants’ leases cannot be modified without lender consent. Look especially for text that states or implies that the landlord has some latitude in acting in the “ordinary course of business.” There is no ordinary course of business in market crises; therefore, this may afford you some latitude to act in concert with saving your project notwithstanding express prohibitions on your conduct.

Four: Be patient--and listen carefully. You’re not the only creditor of your tenant, who is battling with vendors, suppliers, equipment lessors, lenders and perhaps the landlords of its other location[s]. A tenant who is struggling for survival may have some good ideas, scattered among its unrealistic ones, about how to stay in business in your project. Consider adopting the tenant’s sensible proposals into your relationship.

Five: Be creative. Consider some of the following options in workouts with tenants:

a. Relocate them in your project; this can be a win-all-around situation, if the result is that you keep your tenant and a portion of the original rent payment and common area contributions, perhaps freeing up a prime location for re-letting in the process.

b. Back-load a portion of the reserved, fixed rent in a lease amendment; yes, this will diminish your cash flow in the short term—but so does a half-empty project.

c. Allow the tenant to sublease, so long as that rent flows directly to the landlord and the sublessee agrees that any option to renew has to be approved by you.

d. Allow them to downsize, if loss of customers has translated into decreased inventory or staff or whatever it is that has shrunk its need for space; of course, you cannot accommodate a request to reduce the rentable square footage if the shrinkage means that the usable footage excess is compromised by bizarre (unusable) configurations of floor area. You must see the whole chess board at once.

e. Apply a portion of the security deposit to rent installments due—I mean, do they really have time to trash their suite if the tenants are trying to make ends meet? You always can demand replenishment of the deposit when times are better.

f. Promote the businesses by permitting a sidewalk sale (if retail) or [-gasp-] putting the name of the tenant in an otherwise-still empty sign bin in your project monument. One of my clients negotiated a billboard lease renewal by exacting from the lessee a promise that his office project tenants on site could have a discount on advertising when the billboard had no other business.

g. Consider accepting surrender of the premises and terminating the lease before the tenant files bankruptcy and your space becomes subject to the 120- day, assume or reject period in the Code. “Go ahead and file—I dare you!” may not be your smartest mantra—try, instead, asking for evidence of insolvency in the course of making your decision whether to take a hard line as opposed to abating some of the rent for a period or just terminating the lease altogether.

h. Accept rent more frequently than monthly; your loan documents may say you won’t accept rent more than a month in advance—but there are no other handcuffs on when you accept it, usually. With competing mouths to feed, might it be more likely you’ll get paid if you accept half the rent two times during the month?

Six: Scrutinize your common area expenses. Green-eyeshade your CAM vendors’ billings, and make sure their services are re-bid at the end of every contract period. There are plenty of people who would like to mow the turf in the common area or wash your windows these days. Minimize expense by cutting back service; what about having janitorial service only 4 days a week? Think your tenants will despise you for cutting their pass-through costs by 20%? And hey, what’s your management company charging you? By being thoughtful and demanding competitiveness from your vendors, you’ve saved everyone money, including the tenants.

Seven: Continue to study the tenant market. Read widely in the field of your leasing product-type. What’s the forthcoming demand for your type of project, and how can you start soliciting that business now? How do you best position your project for occupancy (besides terminating your tenancies to the “see-through” building point)? Take a really smart commercial broker to lunch; ask her what innovations she’s seeing in your market that is making leasing happen? Remember the adage “the harder you work, the luckier you get.”

Eight: Those you befriend in adversity remain your allies in prosperity. I’m cynical enough not to believe this in the abstract. But I’ve seen it occur in business life, so I know it can happen—“it,” here, meaning referral of tenant prospects from existing or former tenants.

So, landlord--are you doing the dance of Saint Vitus, or trotting with the Foxes?