Commercial Landlord Tenant Law in Colorado

Workout Strategies for Commercial Leases

Tip 1 – Talk to Your Landlord

  • Determine whether the Tenant may set-off from rent payments other unmet obligations of the Landlord.

  • Be organized with financial statements, tax returns and records that show a Landlord honestly where the Tenant sits and how the Tenant plans to recover.  Show what other concessions Tenant is receiving from other creditors.  Don’t forget to treat all of these conversations confidential.  

  • Act before a formal notice of lease default.   A default or termination may set in motion Landlord’s exercise of remedies.  Tenants should be proactive with Landlords before this happens.

 
 
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Tip 2 -  Know Your Lease

  • Does lease contain Force Majeure clause that excuses Tenant’s performance?  If so, does it include pandemics?

  • Does lease contain rent abatement provision that are potentially applicable? (similar to rent set-off)         

  • Do either the Tenant or Landlord have business interruption insurance that might provide a source of recovery?

  • Does the lease contain a co-tenancy clause permitting the Tenant to suspend rent if another tenant in the same premises closes for business?

 
 

Tip 3 - Know Your Goal… Do you want to keep the lease, with rent relief?

  • Consider subleasing your property as a potential way out.

  • An agreement to defer current rent with catch-up payments due later.

  • Consider how to address continuous operation covenants in light of the risk of government ordered business closures.

  • Make sure any lease modifications address all claims the Landlord may have.

 
 
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Tip 4 – Know Your Goal … Do you want to terminate the lease and walk away? 

What does the rent buyout obligation look like?  Bear in mind a Landlord has a duty to mitigate losses.  There may be obligations for Tenants to remove personal property and fixtures.  Some of this property could be valuable to a Landlord and turning it over to a Landlord may help with settlement.   Tenants who surrender a premises should consider securing a release of claims from the Landlord.

 
 

Tip 5 – Know Your Landlord

The Landlord may be limited in the steps it may take without approval from its lenders and investors. 

 

Colorado Landlord Tenant Law Eviction Issues

Most landlords do not want to go to court. 

They may issue eviction notice to increase leverage in workout negotiations or to take over the premises and mitigate damages.

Prerequisite to Colorado Eviction:

  1. The tenant must be “unlawfully detaining” the property. (13-40-104, C.R.S.) Typical ways a commercial tenant may be unlawfully detaining:

  2. The tenant impermissibly holds over after the lease expired or was terminated. (13-40-104(1)(c), C.R.S.)

  3. The tenant impermissibly holds over after a default in rent payments, if the landlord posts 3 days’ notice demanding payment of rent or surrender of the property and tenant does neither. (13-40-104(1)(d), C.R.S.)

  4. While Governor Polis’s executive orders have extended the notice period for nonpayment of rent for some residential leases from 10 days to 30 days, these orders have not affected the notice period for nonresidential (commercial) leases.  However, landlords may not charge late fees or penalties for any nonpayment of rent incurred between April 30, 2020, and June 13, 2020. See Governor Polis’s Executive Orders D 2020 051 and D 2020 101.

  5. The tenant impermissibly holds over after a “substantial violation” and proper notice is given thereof. (13-40-104(1)(d.5) and 13-40-107.5, C.R.S.)

  6. Most typically, a “substantial violation” would be an act or acts that endanger the person or “willfully and substantially” endanger the property of the landlord, a co-tenant, or any person living in or near the premises. (13-40-107.5(3)(a), C.R.S.)

  7. The tenant does not have the right to cure a “substantial violation” in the same way they do a more minor covenant violation. (See below.)

  8. The tenant impermissibly holds over after violating any other covenant or condition of a lease, if the landlord posts three days’ notice demanding compliance with the covenant or surrender of the property and tenant does neither. (13-40-104(1)(e), C.R.S.)

  9. The tenant does not have the right to cure the violation if the landlord has previously given the same notice to the tenant of that violation and the tenant violates the covenant again. (13-40-104(1)(e.5), C.R.S.)

  10. The tenant impermissibly holds over after the building containing the premises is sold and the new owner demands that the tenant vacate. (13-40-104(1)(f) and (g), C.R.S.)

Stages to Colorado Eviction

  1. Generally:  If a tenant is not unlawfully detaining the property, eviction requires a proper notice to quit, in writing, with a period of notice based on the length of the tenancy. (See 13-40-107, C.R.S. for a full list of necessary notice periods.)

  2. Notice and Service of Notice (13-40-108, C.R.S.)

    •  Most commercial eviction claims based on unlawful detainer (such as nonpayment of rent, substantial violations, and failure to comply with covenants) require a minimum of three days’ notice.

    • A notice to quit (including a notice compelling the tenant to quit unless they comply with the lease, such as paying unpaid rent) is served by delivering the notice to the tenant or other occupant of the premises. If no one is on the premises when service is attempted, notice may be made by posting a copy of the notice in a conspicuous place on the premises. 

    • The notice period begins the day after posting, and if it ends on a weekend day or holiday, it instead runs to the next business day.

  3. File a Complaint 

    • After complying with any notice requirements, an eviction action may be commenced by filing a complaint with the court, identifying the property, and stating the grounds for recovery and from whom the property is to be recovered with reasonable certainty, as well as the amount of rent and damages due and the rate at which rent is accruing, as well as any other relief sought. (13-40-110, C.R.S.) 

    • A landlord must file their case in the county court or district court that corresponds to the location of the premises.

      • Note: The jurisdiction of county courts is limited to actions for damage of $25,000 or less (excluding attorneys’ fees and costs, and not affecting the right to grant possession of property). If the plaintiff wishes to proceed in county court, they must either waive claims for damages above the $25,000 limit or the county court must certify and transmit the case to the district court of that county. (13-40-109, C.R.S.)

  4. Serve Summons on Tenant (13-40-112, C.R.S.)

    •  A summons must be served by personal service in the manner allowed in any civil action.

    • If personal service cannot be attained after diligent effort, service may also be had by posting a copy of the summons and complaint in a conspicuous place on the premises and mailing a copy (the next business day after filing the complaint) of the summons and complaint by first-class mail to the defendant at the premises.

    • However, if personal service is not achieved, a landlord may only obtain a judgment for possession, not for money damages, fees, and costs. (13-40-115(1) and (2), C.R.S.)

    • Service must be made at least seven days before the return date specified in the summons.

    •  Service may be done by the Sheriff’s Department, a private process server, or someone else who (x) is at least 18 years of age, (y) is not involved in the case, and (z) is familiar with the rules of service.

  5. Answer: 

    • On the summons return date, the tenant must file an answer to the complaint admitting or denying all material allegations in the complaint and setting forth the bases for their possession of the premises and any defenses they claim, after which the court shall set the issue for trial. (13-40-113, C.R.S.)

    •  If a tenant fails to answer on or before the summons return date, the court may promptly issue a judgment for possession, damages, and costs. (13-40-111(3), C.R.S.)

  6. Trial and Judgment:

    • At trial, if the court finds an unlawful detainer, it shall enter judgment for possession for the landlord. If personal service was accomplished, the court or jury may also find the amount of rent and/or damages (if any) due to the landlord, plus reasonable attorneys’ fees and costs, and render that as a judgment against the tenant. (13-40-115(1) and (2), C.R.S.)

    • A judgment for possession does not automatically entitle a landlord to evict the tenant or permit the use of self-help. The landlord must instead obtain a writ of restitution from the court allowing the landlord to direct the county sheriff to evict the tenant.

    • A court cannot enter a writ of restitution except after 48 hours after the time at which the judgment enters. (13-40-122, C.R.S.)

    • A landlord who evicts a tenant by a writ of restitution has no duty to store a tenant’s personal property, inventory the property, or determine proper ownership. A landlord who does elect to store a tenant’s personal property may charge the tenant reasonable storage costs to recover the property. (13-40-122(3) and (4), C.R.S.) 

  7. Appeals: Colorado law recognizes the right to appeal from a judgment of a district court on an FED action as for any other appealable matter. However, if the judgment was for possession based on nonpayment of rent, the court shall require deposit of the rent money due during pendency of appeal. (13-40-120, C.R.S.)

 Defenses Against Colorado Eviction

  • No unlawful detainer: Eviction may only be had (without the long notice required by 13-40-106, C.R.S.) if the tenant’s actions qualify as an unlawful detainer, i.e., the failure to pay rent, “substantial violations,” breach of covenants, etc. 

  • Inadequate notice: In the case of eviction for failure to pay rent, “substantial violations,” or breach of covenant, three days’ proper notice is required specifically stating the violation (and, in the case of rent and first-time covenant violations, offering the chance to cure) and must be personally served on an occupant of the premises or posted conspicuously before a complaint may be filed. 

    • Also take note if the notice period doesn’t run the full three days or if the last day of the period was not a business day.

  •  Procedural errors in filing: The landlord must properly complete its complaint and provide the accompanying documents. Procedural errors may be a valid basis for dismissal of the claim, sending the landlord back to the beginning. 

  • Unlawful lease conditions: The landlord may not invent new rules to evict a tenant that are not found or based in the lease itself. 

  • Unlawful self-help: The landlord may not deviate from FED procedures by taking the law into their own hands, i.e., by changing the locks. Self-help provisions in a lease are unenforceable.

  • Constructive eviction: Similar to self-help, a landlord cannot constructively evict the tenant, such as by turning off utilities. Such actions may entitle the tenant to damages of their own.