New ERA Article May, 1999

When I Sell My Coin Laundry And Assign My Lease To The Buyer,
What Is My Future Lease Liability?

Coin  laundry  operators  generally lease  rather  than  own  the
premises where their businesses are situated.  When the day comes
that  a  coin  laundry operator decides to sell his  business,  a
transfer  or  assignment  of  the lease  to  the  buyer  will  be
necessary.   Written  leases  customarily  require  the   written
consent  of  the lessor to an assignment of the lease and  leases
generally  provide  that such consent shall not  be  unreasonably
withheld.

In  most instances, consent is provided, the buyer takes over the
premises,  timely  pays the rent, and completes  payment  of  the
purchase  price to the seller.  The lessor is happy because  rent
is  timely  received,  the buyer is happy  because  the  location
produces  adequate  income, and the seller is happy  because  the
purchase price is timely and fully paid.

Sometimes it doesn't work out that way!  Perhaps you will be  the
seller whose run of luck has expired.  Let us assume you wish  to
sell  your  business.  You review your lease and find only  three
weeks  remain to the end of your lease term.  Astute fellow  that
you  are,  you  quickly  negotiate a new lease  with  the  lessor
providing  for  an  additional five  years,  with  two  five-year
options.   You find a buyer, sell your coin laundry business  and
assign  the lease, and proceed to enjoy life by travelling around
the   state  of  California  attending  various  Dixieland   Jazz
Festivals.

As is customary, the assignment of the lease does not release you
from liability in the event your buyer fails to pay the rent.

Six  years  later  and one year into the first  five-year  option
exercised  by  the  buyer,  the lessor,  whose  name  you  barely
remember, drops you a note indicating that rent of $2,000.00  per
month hasn't been paid for the past nine months and requests  the
appearance of your check on his desk for $18,000.00 in  past  due
rent.   You  scratch  your  head, and  wonder  if  you  have  any
obligation to pay this past due amount.

You  call the lessor and explain to him that the option  was  for
the  buyer's  benefit and not your own, that the buyer  exercised
the  option and you did not, that the buyer is operating the coin
laundry  and  you  do not, and that the limit of  your  liability
extends only through the initial five-year term of the lease.

The lessor laughs, and says that since you are the one who signed
the  lease containing the five-year options, thereby binding  the
lessor to provide the lease extensions, you are bound to pay  the
rent  for any such extension imposed upon him by the buyer if  he
fails to pay the rent.  Who is right?

An old California case, decided in 1920, tells us that the lessor
is   correct.   Your  next  call  to  the  lessor  will  thus  be
respectful, ingratiating, and probably on bended knee.

What  if  your  lease negotiations with the lessor were  slightly
different?  What if the lessor had refused to provide any options
and  would  only provide you with a five-year lease?  Assume  you
were  nonetheless  able to sell your coin  laundry  business  and
assign such a lease to the buyer.  Assume the buyer held over for
an  additional  year after the expiration of the five-year  term,
and  the lessor took no action to remove the buyer from the  coin
laundry  under the theory that you remain liable anyway  for  any
such holdover period.

Assume the lessor makes the same telephone call, requesting  nine
months' past due rent, asserting that the buyer would not be in a
position  to retain possession had you not assigned the lease  to
him.   You  respond that you should not be held  liable  for  the
holdover  period since the act of holding over was not undertaken
by you, but rather, by the buyer.  Who is right?

This  time,  you win!  A 1978 case in Los Angeles County  advises
that  it is improper to impose liability on the seller under such
circumstances  for  rent  due for a period  beyond  the  original
lease, since the buyer did not have the right to remain after the
expiration of the lease term.

The  moral  of  the story?  There are long-range consequences  to
lease  negotiations and many traps for the unwary!   In  the  old
west, settlers employed guides to traverse the wilderness.  These
days,  attorneys  can help you traverse the  wilderness  of  fine
print!


[This column is intended to provide general information only  and
is  not intended to provide specific legal advice; if you have  a
specific  question  regarding the  law,  you  should  contact  an
attorney  of your choice.  Suggestions for topics to be discussed
in this column are welcome.]


Reprinted from New Era Magazine
Myles M. Mattenson © 1999-2002

	Myles M. Mattenson ATTORNEY AT LAW 5550 Topanga Canyon Blvd. Suite 200 Woodland Hills, California 91367 Telephone (818) 313-9060 Facsimile (818) 313-9260 *Email:* MMM@MattensonLaw.com *Web:* http://www.MattensonLaw.com	When I Sell My Coin Laundry And Assign My Lease To The Buyer, What Is My Future Lease Liability?
Myles M. Mattenson engages in a general civil and trial practice including litigation and transactional services relating to the coin laundry and dry cleaning industries, franchising, business, purchase and sale of real estate, easements, landlord-tenant, partnership, corporate, insurance bad faith, personal injury, and probate legal matters. In providing services to the coin laundry and dry cleaning industries, Mr. Mattenson has represented equipment distributors, coin laundry and dry cleaning business owners confronted with landlord-tenant issues, lease negotiations, sale documentation including agreements, escrow instructions, and security instruments, as well as fraud or misrepresentation controversies between buyers and sellers of such businesses. Mr. Mattenson serves as an Arbitrator for the Los Angeles County Superior Court. He is also past chair of the Law Office Management Section of the Los Angeles County Bar Association. Mr. Mattenson received his Bachelor of Science degree (Accounting) in 1964 and his Juris Doctorate degree from Loyola University School of Law in 1967. Bi-monthly articles by Mr. Mattenson on legal matters of interest to the business community appear in alternate months in The Journal, a leading coin laundry industry publication of the Coin Laundry Association, and Fabricare, a leading dry cleaning industry publication of the International Fabricare Institute. During the period of May 1995 through September 2002, Mr. Mattenson contributed similar articles to New Era Magazine, a coin laundry and dry cleaning industry publication which ceased publication with the September 2002 issue. This website contains copies of Mr. Mattenson's New Era Magazine articles which can be retrieved through a subject or chronological index. The website also contains copies of Mr. Mattenson's Journal and Fabricare articles, which can be retrieved through a chronological index. In addition to Mr. Mattenson's trial practice, he has successfully prosecuted and defended appeals on behalf of his clients in various areas of the law. Some of these appellate decisions are contained within his website.