Larissa leases to Metal Fabrication Corporation a 10,000 square-foot building under a written lease with a twenty-year term, rent payable an nually. The lease includes a clause stating that Metal Fabrication is re sponsi ble for making all necessary

Question

repairs, including rebuilding the structure after its destruction by any cause beyond Larissa's control. The lease does not include a clause concerning its assignment. One day after the tenth rental payment, Metal Fabrication, without Larissa's knowledge or consent, assigns its interest in the lease to National Steel, Inc Meanwhile, Larissa dies and Olina inherits her interest in the building. Without the knowledge or consent of either Metal Fabrication or National Steel, Olina sells the building to Prime Properties, Inc The next month, the building is destroyed in a devastating storm. Metal Fabrication rebuilds it and files a suit against Prime Properties for the expense. The defendant responds that the lease has terminated. Is Prime Properties correct? If so, when did the lease terminate? If not, is Prime Properties liable for the cost of rebuilding the structure? Why or why not?

Answer 1

Prime Properties is not correct. The lease has not terminated.
Absent a provision in the lease to the contrary, its assignment is not prohibited, even without the consent of the landlord. The death of a landlord does not terminate a lease, unlike some other contracts. The owner's sale of leased premises to a third party does not terminate a lease, even without the consent of the tenant. Normally, the destruction of rental property would terminate a lease, but this commercial lease contained, as do many long-term commercial leases, a clause that required the tenant to rebuild the structure if it was destroyed by a cause beyond the landlord's control, which includes a flood. Such clauses are legally binding.

?Thus, none of these events-Metal Fabrication's assignment of the lease to National Steel, Larissa's death, Olina's sale of the property to Prime Properties, or the destruc tion of the building in a storm-terminated this lease. There may be a reduction in the amount of rent Metal Fabrication, who remains li able de spite the assignment, must pay while the premises are being re built.

Prime Properties is not liable for the cost of rebuilding the structure. Again, the lease re quired the tenant to rebuild the destroyed structure at the tenant's expense.

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