I received a call from a tenant who has been leasing space in a commercial property for the last 33 years. She informed me that the property was being sold and was fearful that she would be forced to vacate her space by the new owner. Her primary irritation was the lack of information available to her regarding the transfer of the property; neither the agent, the seller, nor the buyer had been in contact with her. She wanted to know her rights regarding her tenancy.
After confirming that the tenant had a validly executed and enforceable lease (and not a month-to-month tenancy at will), I informed the tenant that the four corners of the lease document would determine her rights and obligations. A review of the written lease revealed that the lease termination date was several years after the upcoming closing and there was no specific term or provision triggering the termination of the lease upon the sale of the property. Accordingly, notwithstanding anything she may have “heard” to the contrary, she had a right to remain in the leased space, at least until the end date of the lease. She wondered “why have I not been contacted, and shouldn’t there be an assignment of lease for me to sign?”
A few things one should understand when a commercial building changes hands:
1. Prior to the closing, in many instances, tenant will be asked to execute a couple of documents:
a. an Estoppel Certificate, which essentially is a request to confirm certain terms of the lease; and
b. a Subordination, Non-disturbance and Attornment Agreement (or SNDA), which document essentially
permits the lender to step into the shoes of the landlord if there is a default under the loan.
2. At the closing, the seller (the present landlord) will assign its interest in the lease to the buyer (the new landlord to be). The buyer will then “stand in the shoes” of the seller as landlord. The tenant is not a party to this document, and will continue unaffected by the transfer, except for remittance of the monthly rent checks to a new landlord.
3. After the closing, the tenant should be receiving a formal written notice, likely sent jointly by the buyer and seller, informing the tenant that the property has been sold and rent checks should now be remitted to the buyer.
Provided the tenant observes all of her obligations under the written lease, she will continue to enjoy a right of quiet enjoyment to the leased premises, and cannot be forced out just because the landlord sells. As always, we recommend that you contact a knowledgeable real estate attorney should you have any questions regarding commercial lease issues.
Berlin Patten Ebling, PLLC
Article Authored by Mark Hanewich, Esq. firstname.lastname@example.org
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