Can A Successor Landlord Enforce A Lease & Guarantee When The Successor Landlord Does Not Get An Assignment Of The Lease Or Guarantee From The Original Landlord?

In Peyton Building LLC v. Niko’s Gourmet, Inc., 2014 WL 1632243 (Wn.App. Div. 3, April 2014), a building was originally owned by a Corporation.  In 2002 the Corporation entered into a 10 year lease with a Restaurant.  The Restaurant’s Owner guaranteed the lease.  A LLC later acquired the Corporation but, as part of that acquisition, did not obtain an assignment of the lease or the guarantee.  In 2011 the Restaurant defaulted and vacated the rental premises.  The LLC sued the Restaurant and its Owner to collect the unpaid rent.  The trial court ruled in the LLC’s favor against both the Restaurant and its Owner, awarding the LLC a judgment for roughly $100,000.  On appeal, the court considered whether the LLC could enforce the lease against the Restaurant and the guarantee against the Restaurant’s Owner considering the LLC did not obtain an assignment of either contract.  The court of appeals upheld the judgment against the Restaurant because the lease “touched and concerned” the land (e.g., payments under the lease were sufficiently connected to the use of the premises), but overturned the judgment against the Restaurant Owner because the guarantee was not sufficiently related to the use of the rented space.  So what’s the take-away? Always get an assignment of the lease and guarantee.

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