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Does a New Owner Have to Honor a Commercial Lease?

Commercial property is one of the best investments possible. However, tenants are often concerned about their tenancy, particularly when the owner intends to sell the building. Commercial tenants often have high expenses associated with moving the location of their business, and an unexpected end to their lease could cause them to suffer serious financial damages or even bankruptcy.

What are Tenants’ Rights?

A tenant has specific rights as long as they have an executed lease in place. A lease is a written legal contract between a landlord and tenant. The lessor provides use of the property for a defined period of time in exchange for payment by the lessee. The lease should contain a number of clauses that detail the rights and responsibilities of the lessor and lessee. Both parties must abide by the contract for the term of the lease. The tenant is assured of their right to the property as long as they pay rent and abide by the other terms of the lease. For this reason, the more detailed a lease is, the better it is for both parties.

What Happens When a New Owner Takes Over?

Generally, when a landlord sells a commercial property, Wisconsin law requires a landlord to keep the current leases and tenants in place. A new owner must thereby abide by the terms and conditions of the leases that are in effect at the time of the sale. This should hold true unless there are any specific terms in the lease that pertain to the sale of the property. If terms are in place in the lease, the lease should take precedence. A new owner cannot evict a tenant simply because they took over a lease that is already in place. The same holds true for the rental price. A new landlord cannot disregard the terms of the lease and increase the rent while a lease is in place.

When a New Landlord Can Make Changes

Unless it is expressly written in the terms of the executed lease, the new landlord must abide by the terms of the contract even though he did not sign the original document.

However, the new landlord may do whatever they want once the term of the lease expires. For instance, the new landlord may choose to increase the rental price effective with the new lease. Or the landlord may want to use the property for other uses and may elect not to renew the lease. These are all possible actions as long as the landlord follows the terms of the written lease. In cases where there is no written lease, the tenancy is likely considered month-to-month and the lease therefore comes to an end at the end of the month unless both parties renew. It is always necessary to have a written lease in place when renting commercial property.

Commercial leases can be complicated and they may contain many unfamiliar terms and conditions. It is helpful to seek legal guidance before you sign any type of lease. To learn more about commercial leases, contact our attorneys at (608) 784-8310 or online for an initial consultation.

Published July 18, 2022
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