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Page 6 — Property Management Quarterly — May 2015
W hat’s in a name? A rose is
a rose, or so they say. That
may not prove true in the
case of garnishing a ten-
ant’s bank account or mak-
ing a claim on a tenant’s insurance
policy. In instances such as these, the
true legal name of a tenant can be
essential.
Generally speaking, a commercial
tenant is a limited liability company,
some form of corporation or partner-
ship, or an individual doing business
under a trade name. More often than
you think, the true name of the ten-
ant is misstated in the body of the
lease, leading to a host of issues that
easily could be avoided. The identity
of the tenant comes into play in a
number of circumstances, including
bankruptcy, a tenant default or even
a casualty.
In some cases, the true identity
of the tenant is given little thought.
In fact, it is not uncommon for an
attorney to receive a request to draft
a lease based on a letter of intent
that sets out all of the major deal
points but fails to identify the tenant
or the guarantor(s) with particularity.
This information is often inserted in
the lease agreement at the 11th hour,
just prior to lease execution and,
sometimes, without good legal coun-
sel, haphazardly. In other instances,
the tenants referenced in the body
of letters of intent are either entities
that have not yet been formed or are
out-of-state entities, which have not
yet registered with the Colorado sec-
retary of state. Registering with the
state can be accom-
plished with a few
clicks of a mouse
and the payment of
a nominal fee.
Before executing
a lease, it is always
a good idea to con-
firm that an entity
or trade name is
registered with the
Colorado secretary
of state and that
you are using the
correct legal name
of that entity in the
body of your lease.
These records can be found online at
. This informa-
tion is provided free of charge.
It is also a good idea to review cop-
ies of the business entity’s govern-
ing documents. These documents
should disclose who the owners and
principals of the tenant are and their
respective percentage ownership
interests. This information could be
helpful if there is a change in owner-
ship constituting an “assignment”
for purposes of the lease. It could
also be helpful in determining from
whom the landlord should consider
obtaining a personal guaranty. Per-
haps most importantly, these docu-
ments identify the party authorized
to execute the lease on behalf of
the tenant, which is information
that could help a landlord avoid any
potential argument by a tenant – no
matter how weak – that the lease is
unenforceable because the appro-
priate party did not sign it.
In an ideal world, the tenant iden-
tified in your lease should be con-
sistent with the legal name of the
tenant registered with the secretary
of state, the tenant identified in the
certificate of insurance provided by
the tenant, and the name on any
checks tendered for rent.
What does this all mean for a
landlord? For starters, a misidenti-
fied tenant could make asserting an
insurance claim or filing an action
against a defaulting tenant more
cumbersome. Specifically in the
case of a tenant default, it could
mean that additional claims under
alternate legal theories must be
asserted in order to obtain a judg-
ment against the true entity. At the
end of the day, this means more
money and more time before a
judgment can be obtained.
It might also make obtaining per-
sonal service on the tenant more
challenging. (Remember that one of
the primary functions of the Colo-
rado secretary of state’s website is
to provide information for the regis-
tered agent for an entity. The regis-
tered agent is the party authorized
to be served on behalf of the entity.)
If you don’t have the correct tenant
name, it may be difficult to deter-
mine how to obtain service.
And perhaps most importantly,
if you obtain a money judgment
against the wrong entity, it can
make collection next to impossible.
By way of example, if the name you
obtain judgment against does not
match the name on the actual ten-
ant’s bank account, you can’t attach
to those funds.
At the end of the day, an ounce of
prevention is worth a pound of cure.
Taking a few minutes to review an
entity’s governing documents and
the information available on the
Colorado secretary of state’s website
before signing a lease could save
you time and money at a later date.
This, coupled with periodic reviews
of the certificates of insurance and
the source from which rental pay-
ments are received, could make life
a little easier if the tenant should
default or in the event there is a
need to file an insurance claim.s
Amanda H.
Halstead, Esq.
Member, Mills,
Schmitz, Halstead,
Zaloudek LLC,
Denver
Legal
To confirm that an entity or
trade name is registered with
the Colorado secretary of state,
visit the department’s website,
Also, consider confirming
whether the tenant or its prin-
cipals are a “specially desig-
nated national and blocked per-
son.” This information can be
accessed on the U.S. Treasury
Department Office of Foreign
Assets Control’s official website,
Helpful websites