hi, I am planning to buy a Liquor Store, and I got a news from third party that The Property owner is planning for bank currapcy in nearby future. Owner is going to give me 10 Yrs of Lease. If i buy that business and within few months Owner files for bank currapcy, will I be in Trouble? Will my lease valid? Can Bank Kick me out? Or if Bank will sell that Property to Third Party, Can my Rent will be Affected?? Can Bank or Third PArty can Increase my REnt - Even Though I do have a lease of 10 Yrs..???
There are two distinct issues here - one bankruptcy, and one general commercial leasing law. In regard to bankruptcy, yes, it is possible that a bankruptcy court could terminate the lease. It usually comes down to the question of whether the property is worth more without your lease. Mind you, such proceedings usually take a fair amount of time to go through, but they don't take 10 years. Whether the lease is likely to be terminated also depends on the type of bankruptcty the owner files. He can file for a total liquidation, in which case the property will be sold, or he can file for a reorganization and keep the property. In either case, the lease can be terminated, but in a liquidation, the decision is primarily made by the court-appointed trustee. In a reorganization, the owner would make the decision. To summarize, yes, it's possible and it's hard to say whether or not a lease termination is likely to occur. That being said, in most of the bankruptcy matters I have been involved in, the parties want the lease to continue.
In regard to the commercial leasing matter, whether the lease will be affected by a sale depends on whether the contract provides for the lease to continue. Generally, the lease is deemed to go with the property and the new owner will be bound by whatever terms are included in it. Sometimes, the parties agree that the lease may be terminated upon sale. It is important to read every provision carefully.
Please let me know if this has answered your questions.
Is there anything for the safety of the Tenent in this kind of Situation? As they are creating a new lease, Is there anything we can put on a Lease so that i will be on a safe Side.. ?
Give me a moment to check one provision
The bankruptcy issue cannot really be protected against. The law allows for leases to be terminated if that is necessary and you really can't contract away that right. As far as the sale provision goes, I always recommend to my commercial clients that they include a provision specifically stating that the lease will survive the sale of the property.
isn't there any document or written agreement from the Bank I can get to protect my Lease, in the case of Bankcurrapcy. As Bank is a final Authority to take all decisions?
You can get a document from the bank to protect you in the case of a foreclosure, but that doesn't really protect you in bankruptcy. The bankruptcy process is, to put it in layman's terms, it's own with its own rules. As I mentioned, leases are not usually terminated in the case of a bankruptcy, unless they are particularly low income or undervalued.
By the way, sorry for the delay in my responses. I was having technical difficulties and had to switch browsers.
By the way, the bank is not generally the entity that gets to make the final decision on whether the terminate a lease. First, the trustee determines the best course of action and then the judge will determine whether to order the termination.
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