Legal Question in Real Estate Law in California
Commercial Lease Transfer of Property
I am currently renting a space in an old commercial building. My landlords are selling the building and I am concerned with the lease I signed two years ago. It is a lease from the previous two tenants which has a paragraph addendum to transfer the lease assignment to me for another five year term with option to renew another five years. The lease is originally from the late 1970's. There is no mention in the lease regarding sale of property and new ownership (whethere the new owner would have to honor the tenant's lease). When I purchased the business two years ago, I was not aware of the owner's plan to sell the property otherwise I would not have bought the business if there would be no place to run the business in. Could I get evicted even with an existing lease if a new owner takes over the building?
Thanks.
2 Answers from Attorneys
Re: Commercial Lease Transfer of Property
Probably not. Leases are traditionally interests in the real estate, even if not recorded, and take priority over the possessory claims of a new owner of the fee.
Large commercial properties are bought and sold all the time by real estate investment trusts, wealthy investors, Wall Street listed property investment companies, and investors of all sizes and kinds. They buy them for cash flow, and love it when the buildings they buy are full of good long-term tenants producing stable income.
If you or I bought the Bank of America Building or the Sears Tower, we would want and expect the tenants to stay in place and keep paying that rent! The law supports that vision.
Unless your lease specifically states that it terminates upon a change of ownership, a sale of the building will just result in your having a different landlord. The new landlord has no more right to toss you out or abbreviate the (properly-documented) terms of your rental than the old landlord would have had. The ownership change does not diminish your rights as a tenant.
If you have handshake deals or other wink-wink stuff with the seller, or course, thenew guy isn't going to know about that nor will he have to honor it.
Re: Commercial Lease Transfer of Property
I am posting just to note that I agree completely with Mr. Whipple's analysis, and his view that landlords want the tenants in the building. They are what makes commercial real estate valuable. The only time a tenant need worry is when a new owner wants the place for himself, and the lease will expire.
Very truly yours,
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