Legal Question in Real Estate Law in New York
Tenant wants to sell business and break lease
Tenant has 18 months left on a 5 year lease. He is claiming that his fish retail business is not doing well and he wants to sell it-He has found a buyer for the business but he wants me to reduce the rent for the remaining 18 months to make the offer atteactive to the new buyer. I am standing by the terms of the old lease which also requires me to pay for all the utilities. As this business uses a tremendous amount of water I am losing money as well. The old tenant offered to buy out his old lease-he did not disclose the amount of money he would offer if I would give the new buyer a new reduced lease. I am not sure which way I should go with this-the old tenant has been problematic for the past 31/2 years as he never paid his rent on time , ther is a terrible smell coming from his store and I have been given violations and summons regarding it. Do I have a right to uphold the terms of the original lease for the next 18 months or can I incorporate those terms into a new lease with the new owner? Am I obligated to rent the store to the new owner? What are my resources and /or options?
2 Answers from Attorneys
Re: Tenant wants to sell business and break lease
I have to qualify my general remarks by saying that the answers to your questions depend on the terms of your written lease and the method by which your existing tenant proposes to sell his business. I am not familiar with either of those two things.
If the tenant named on the lease is a corporation, the lease is an asset of the tenant's business. If the tenant simply sells the stock in his business, there is no legal change in the named tenant. Your tenant is probably free to do that under his lease without your consent.
If your existing tenant is a sole proprietor and/or is merely selling assets of his business, he is probably really looking to assign or sublet the lease. That is a little different. Typically a commercial lease will entitle a landlord to approve or reject any proposed new tenant assignee or sublessee. In the typical commercial lease, the landlord's approval of a new tenant-assignee does not by itself relieve the original tenant of his obligations under the original lease.
But if you enter a new lease directly with the new tenant, you and the new tenant will have to agree upon the terms. That would probably put the old lease terms and tenant out of the picture.
If your lease gives you the right of approval, the most advantageous situation to you legally may be to allow your existing tenant to assign or sublet his lease to a solid party. The existing tenant would still be on the hook for the original lease terms (make sure), so you are giving nothing up. Meanwhile, the new tenant may turn out to be a better occupant than the original tenant.
You would be wise to review the terms of your original lease carefully before you make your decision. Your lease may be different from the so-called typical lease. And find out more about what exactly your tenant plans to sell and how. Good luck.
Re: Tenant wants to sell business and break lease
I see that you are based in the Five Towns, of which I am a native. As always, the answers to your questions will be found in your lease agreement.
The practical response is that with 18 months left on a lease, a tenant not covering his expenses is a dangerous tenant to have, especially if the tenant is judgment proof.
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