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socrateaser
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Andy leases to Burgertown Franchise Corporation, a 10,000 square

Customer Question

Andy leases to Burgertown Franchise Corporation, a 10,000 square foot building under a written lease with a 20-year term, rent payable annually. The lease includes a clause stating that Burgertown is responsible for making all necessary repairs, including rebuilding the structure after its destruction by any cause beyond Andy's control. The lease does not include a clause concerning its assignment. One day after the tenth rental payment, Burgertown, without Andy's knowledge or consent, assigned its interest in the lease to Chicken Hut Restaurants, Inc. Meanwhile, Andy died and Donna inherited Andy's interest in the building. Without the knowledge and consent of either Burgertown or Chicken Hut Retaurant, Donna sold the building to Eagle Investments, Inc. The next month, the building was destroyed in the flood of a nearby river. Burgetown rebuilt it and then filed suit against Eagle for the expense. Eagle responded that the lease had terminated.

Is Eagle correct?
If so, when did the lease terminate?
If not, is Eagle liable for the cost of rebuilding the structure?
Submitted: 1 year ago.
Category: Business Law
Expert:  socrateaser replied 1 year ago.
Is Eagle correct?

A: Yes. Under the common law, a lease terminates with the conveyance of title to a new owner, unless the tenant "attorns" (submits) to the new landlord and the landlord consents.

If so, when did the lease terminate?

A: The lease terminated on the date when Donna transferred title in the property to Eagle -- unless Eagle accepted rent from Chicken Hut. after that date.

If not, is Eagle liable for the cost of rebuilding the structure?

A: Eagle is not liable to Burgertown, because an assignment of a lease terminates the assignor's interest in the lease. Burgertown had no obligation to rebuild the structure, at least not under any theory of real property liability. That liability transferred to Chicken Hut.

Burgertown's claim would be against Chickenhut, under a theory of unjust enrichment, whereby Chickenhut received an unjust benefit at Burgertown's expense and should reimburse Burgertown for the value of the unjust benefit received.

Finis.

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