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View Full Version : Does a 10 yr commercial lease survive foreclosure?


ttnguyen
Dec 15, 2009, 03:47 PM
In Irvine, CA, there exists a 20yr old apartment building.

This apartment building was owned by John in Jan 2009. At that time, he signed a 10yr lease with ABC Laundry to provide laundry services for his apartment building.

ABC Laundry established washers and dryers and performed maintenance on these onsite appliances.

In Jul 2009, John foreclosed on this apartment building. The apartment building became owned by Acme Bank of Oregon.

In Aug 2009, Mark purchases the apartment building from Acme Bank of Oregon.

Does the lease between ABC Laundry and John still apply to Mark?

The pertinent clause of the lease:
9. Assignment or Transfer.
This Lease shall be binding upon the parties hereto, their respective heirs, personal representatives, successors, assigns, or transferees.

Is Mark a transferee of this lease?

All names, dates and locations have been changed from the original to protect identities.

ScottGem
Dec 15, 2009, 03:55 PM
Unlike residential property, leases on commercial property do survive foreclosure.

By the way, John didn't foreclose, he was foreclosed on.

LisaB4657
Dec 15, 2009, 04:01 PM
Unlike residential property, leases on commericial property do survive foreclosure.

By the way, John didn't foreclose, he was foreclosed on.

"Sometimes" they survive foreclosure. If the owner signed an Assignment of Leases and Rents when he originally financed the building then the commercial lease would have been assigned to the lender and it would survive. If there was no Assignment of Leases and Rents then the answer would depend on a careful reading of the entire lease and not just the little piece that was provided by the OP.

ttnguyen
Dec 15, 2009, 04:13 PM
"Sometimes" they survive foreclosure. If the owner signed an Assignment of Leases and Rents when he originally financed the building then the commercial lease would have been assigned to the lender and it would survive. If there was no Assignment of Leases and Rents then the answer would depend on a careful reading of the entire lease and not just the little piece that was provided by the OP.

That is the only portion of the lease that deals with transfer. The lease is only 2 pages.

So I guess the next step would be to get a copy of the financial papers from the bank that foreclosed upon John?

I suppose Mark should have been more diligent in reviewing all possible relationships from external vendors. Chalk this one up to life experience.

LisaB4657
Dec 15, 2009, 04:21 PM
The best next step would be speaking to a real estate attorney. There are many issues. What about the equipment that was on site? Who owned it? What happened to it after the foreclosure? Has ABC come in to service it after Mark took ownership? All of these things can create a contractual relationship even if nothing has been signed.

ttnguyen
Dec 15, 2009, 04:34 PM
Ok, thanks Lisa and Scott. I appreciate your inputs on this matter.