Legal Question in Business Law in California

Landlord sues all previous tenants (commercial lease)

To whom it may concern:

I'm not sure if this case belongs to the Real Estate Law or Business Law.

This is regarding a storefront business, the business has changed hands many times.

I'm one of the owner during these times.

The landlord is currently suing all the previous owners for the defaults on the current owner for not paying the rent (lease has 5 more years left).

Here are my questions on how to handle this situation:

(1) Can the landlord go after all the previous owners, and on what grounds...??

(2) If only 3 out of 5 previous owners can be contacted, the other 2 moved away or is out of country, Does that mean the other 2 can get away with the lawsuit...??

(3) My business was a Corporation entity, and the corporation was closed years ago, so can the landlord still go after me personally

or not ...??

(4) We feel it's not right for the landlord to go after previous owners, the landlord should take his own responsibility for granting the lease to the current owner.

What is the best way to handle this case for all the previous owners...??

Please provide the most helpful answers because we want the best protection possible, we are in Los Angeles area, thank you very much.


Asked on 2/24/07, 4:46 pm

2 Answers from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Landlord sues all previous tenants (commercial lease)

I think the answer is not so simple. One of the issues would be whether the lease was assignable. There might also be questions regarding fraudulent transfer of the business from one owner to the next, and whether the business-sale transactions complied with the bulk sales law of the Commercial Code.

If you have been sued, failure to file a responsive pleading could result in a judgment against yoor corporation, or you, by default.

There are also at least three theories upon which personal liability can be asserted against you: Piercing the corporate veil (alter ego), failure to pay creditors before yourself when winding up the corporation (breach of fiduciary duty), and personal guarantee.

You should see a lawyer before the response due date on any summons.

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Answered on 2/26/07, 9:24 pm
JOHN GUERRINI THE GUERRINI LAW FIRM - COLLECTION LAWYERS

Re: Landlord sues all previous tenants (commercial lease)

The answer to nearly all your questions will depend upon whether you personally guaranteed performance of the entire lease and were not released of that obligation when you transferred the lease.

For example, when you sold/transferred your business, if the landlord did not release you of your obligation to pay rent, and the landlord merely accepted an assignment of the lease, then the landlord can pursue you and the person to whom you sold/transferred your business.

In general, you need to obtain an express written release.

If you did not personally guarantee the lease obligation, then the landlord cannot pursue you personally. But if you did personally guarantee it, then you may be liable personally.

If you need assistance or would like further comment, please feel free to call or email. We are real estate litigators with extensive experience in commercial lease disputes.

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Answered on 2/24/07, 5:00 pm


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