We recently sold our restaurant to a nice couple with no experience in the restaurant industry. The business is running itself and we are helping them. However, our landlord has refused to allow us to assign our 3 years lease to this couple and stated that they didn't have enough experience to run a restaurant. We stated that we would continue to leave our name on the contract (co-sign), but they still refuse. However, they accepted the new owners' payment for the rent. Does this bind the landlord to accept the offer from the new owners? Do they have the right to prevent me from selling my restaurant to anyone I want to sell to?
-- Ernie
A.
Entering into a long-term lease is quite possibly the biggest liability there is for a small business owner.
Most business leases will provide that they cannot be assigned without the prior consent of the landlord. Even if the lease says that such consent cannot be unreasonably withheld, the landlord may still be able to make a convincing case that it would not be unreasonable to refuse to consent to an assignment to someone who has never run that type of business before. Here, it may seem unreasonable that the landlord would not consent to the arrangement when you would agree to remain liable on the lease, but this may once again be the prerogative of the landlord. It may also help your case that the landlord accepted rent from the new owners, but not necessarily.
Maybe the landlord would be agreeable if the new owners were willing to pay more rent?
Another option may be to continue with the current situation and just see what happens. If the landlord continues to get the rent, the more time that goes by the less likely the landlord may complain? Ultimately, though, you should understand that there is a risk the landlord could try to terminate the lease and hold you liable for the balance of the term. This would be subject to the landlord's duty to mitigate damages. There may be no perfect solution here. The best suggestion may be to go see a local attorney to try to come up with some strategies to deal with this short of litigation.
