Case Law Summaries

LVP Associates, L.L.C. v. Women’s Health Care Group

• Opinion Date: October 31, 2001
• Real Property Law
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LEASES; SUCCESSORS—Where it is undisputed that the current tenant at a property is the successor to the business of the tenant actually named on a lease, the new tenant will be bound by the lease.

In 1991 a landlord entered into a lease with a doctor for a three year term. Shortly before the term expired, that doctor and another doctor, “personally” and “for the corporation” executed a “lease amendment.” The amendment substituted the corporation and the two doctors, personally, as the tenants. They also extended the lease for three years. The lease amendment provided that except as provided otherwise, “all of the terms and conditions of the Original Lease shall remain in full force and effect.” The lease contained a holdover provision calling for double rent if the tenant remained in the premises after the expiration of the tenancy and without execution of a new lease. The lease also provided, in part, that “[t]he provisions of this lease shall apply to, bind and inure to the benefit of Landlord and Tenant and their respective successors, legal representative and assigns… .” Another provision of the lease required the landlord’s written consent for an assignment or subletting. After the lease expired, the landlord’s lease renewal negotiations continued. Eventually, the tenant notified its landlord that it was vacating the premises. Because lease negotiations were taking place, the “double rent” provision did not occur. Once lease negotiations ended, the landlord sought “double rent” and the Court agreed that the landlord was entitled to such rent. This was true despite the tenant’s argument that because the landlord accepted the rent and failed to seek “double rent” during negotiations, it had waived its right to collect double rent and should be estopped by virtue of such inaction. The tenant’s theory was that allowing the landlord the right to obtain “double rent” after “unsuccessful lease negotiations would encourage bad faith by the landlord and termination of the negotiations in order to obtain ‘double rent.’ Here, however, the Court found no suggestion of “bad faith negotiations” or that there was a breach of the landlord’s obligation of good faith and fair dealing with respect to the lease negotiations. To the contrary, the landlord had sent three letters to its tenant respecting its obligation to pay “double rent” as a “holdover tenant.” Consequently, the Court held that the landlord was entitled to “double rent.” The tenant also contended that its current business, a professional corporation, never became a party to the lease and never expressly assumed any obligation under the lease. It pointed to no agreement or any provision within its own shareholder agreement whereby it assumed the liabilities of the individual doctors or of the corporation that had signed the lease amendment. Further, one of the doctors certified that there was no agreement by the current corporate tenant to assume the debts or liabilities of the tenant. The Court disagreed, finding that it was undisputed that the current business “was the successor to the medical practice of the other defendants and that” two other doctors had “merged” their practices with the practices of the two doctors that had signed the lease amendment. That merger created the business that had been occupying the premises at the end of the lease term. Further, the occupant of the premises paid the monthly rent until its attorney wrote to the landlord that the particular named medical group wished to terminate “their lease at the building… .” Consequently, “nder the unique circumstances,” including the letter acknowledging the occupant as the tenant, the Court held that the current corporate medical practice occupying the premises “became liable for the tenant’s obligations under the lease.”