01/31/2017 by John R. Lockard
In the recent case of KCE Properties, Inc. v. Holy Mackerel, Inc., a landlord pursued a fairly routine claim against its former tenant for unpaid rent. In the case, however, the landlord also included a claim against one of the officers of the tenant corporation for “conversion” (wrongful exercise of control over another’s property) claiming that the officer removed certain property from the premises that belonged to the landlord.
The commercial lease contained a fairly common clause providing that any “alterations and improvements” to the premises became property of the landlord upon termination of the lease. After giving notice of termination and vacating the premises, one of the tenant’s corporate officers allegedly removed some of these fixtures and in doing so caused damage to the premises. The landlord brought a claim against the corporate officer, as an individual, for the value of the removed fixtures. The United States District Court, applying Virginia law, found that the conversion claim could proceed against the corporate officer personally, separate from any claim the landlord had against the tenant corporation.
The case is significant in that the officer of the corporation was not a party to the lease. In most circumstances, officers are not personally liable for debts of the corporation. In this case, however, the court recognized that there was an independent, common law duty prohibiting the wrongful exercise of control over the property belonging to another person. The court allowed the claim to go forward against the corporate officer since the landlord alleged that the corporate officer personally removed the property, even though he did not sign the lease in his personal capacity.
Virginia law allows several options for landlords to pursue collection of unpaid rent and other damages against tenants, including a “landlord’s lien” against property owned by the tenant that may be present in the premises. Commercial landlords should consult with an attorney experienced in Virginia landlord-tenant law regarding their possible remedies for collecting unpaid rent, including to determine the most cost-effective options. For more information about this article, please contact the authoring Attorney.