Property sales happen. Buildings change hands for countless reasons, and as a commercial tenant, you generally do not have control if your landlord decides to sell. What you can control is understanding your rights when ownership transfers.
The good news is that commercial leases typically survive property sales. Still, “typically” is not the same as “always,” and the details of the sale and your existing contract matter significantly.
The general rule of continuity applies
In most cases, a lease “runs with the land.” This legal concept means the agreement attaches to the physical property, not just the person who owns it. When a new owner buys the building, they usually inherit your lease agreement, too.
The new landlord steps into the shoes of the old landlord. They must honor the rent price, the lease term and any specific amenities promised in your original document. You continue your operations, but you send your rent checks to a different entity.
Critical lease clauses to review
The specific language in your contract can alter this presumption. Consider examining the following clauses:
- SNDA agreements: A Subordination, Non-Disturbance and Attornment agreement can ensure that the new owner or their bank cannot evict you as long as you pay rent.
- Termination on sale clauses: Some leases include a “kill switch.” This clause allows a landlord to end the lease early if they find a buyer for the building.
- Assignment rights: Your lease should clarify that the landlord can assign their interests to a new owner without voiding the contract.
You need to verify these details to ensure your business remains secure from a potential disruption.
Situations that can threaten your tenancy
Certain circumstances can weaken your position during a property sale.
Foreclosures present particular risks, especially if your lease includes subordination clauses that prioritize the lender’s interests. An unrecorded lease may also create disputes if a new owner claims they had no knowledge of your tenancy when they purchased the property. Month-to-month arrangements and verbal agreements offer far less security than written, long-term leases with clear terms.
Keep your business safe from legal issues
Your lease is the foundation of your business location, and a small change in ownership can lead to unexpected legal gaps. While the law generally protects tenants, the specific language in your contract ultimately dictates your actual security.
The most effective way to protect your interests is to have a professional review your agreement. Such action can help identify hidden clauses that might put your tenancy at risk during a sale. Investing in a quick lease audit provides the certainty you need to focus on running your business.