Commercial Real Estate and Tenant Rights

Tenant Rights During a Commercial Property Sale

When a property owner is selling commercial property currently utilized by tenants, it is crucial that they protect the rights of those tenants throughout the process. This can make the selling process slower, as they may be limited by the tenants’ hours of operation and other use of the space—but failure to uphold those rights may lead to landlord-tenant disputes.

The Terms of the Lease

It’s important to recognize the significant differences between commercial tenants and residential tenants under real estate law. There are numerous legal protections in place for residential tenants, ensuring that they aren’t taken advantage of by shady landlords or those who would put them in unsafe living situations. That is not the case for commercial tenants. In real estate law, commercial tenants and landlords are both engaging in business, and the law views them both as capable of protecting their best interests legally. The onus is on both parties to protect their best interests via the terms of their lease. Because of this, the terms of your lease will dictate what both parties can and cannot do during the selling process.

Lease Assignment or Termination

Note that this extends to what happens after the sale of the property. The lease may allow the lease to be assigned to the new buyer in the event of a sale. However, it may also require termination of the lease should the property be sold. A tenant’s rights depend largely on the language of the lease. In some situations, the tenant has the right to terminate their lease if they do not want to continue renting from the new owner. In others, they can only terminate the lease if very specific requirements are met.

Access Rights

Commercial tenants should still have full access rights throughout the selling process, as any limited access to their premises could negatively impact their business. However, the lease will likely also require them to grant access to the owner of the property for inspections, showings, and repairs. For example, it’s unlikely that the tenant would be forced to give up access to the property for an entire day to allow the buyer to show it, as this would interfere with their business; however, they would almost certainly need to grant limited access during open hours and full access when they close for the day. This is something that prospective commercial tenants should clarify when looking at their lease, as their rights in this area are largely governed by what is written in their lease agreement.

Repairs and Maintenance

If the owner is required to perform repairs and other maintenance work under the lease agreement, they are likely obligated to continue doing so during the selling process. They have the right to property that is safe for employees, visitors, and clients—and that means that the owner must continue fulfilling their obligations under the terms of the lease. If the owner falls behind on these obligations due to the demands of selling the property, the tenant may be owed whatever benefits are allowed under the lease when the owner fails to uphold their side of the contract.

Use of the Property

The tenant of the property has the right to the same use of the property that they enjoyed prior to the owner attempting to sell it. Landlords may try to interfere if the tenants’ use of the property makes it harder for them to sell or market the property to prospective tenants, but in this situation, the rights of the tenant may override the rights of the landlord.

No matter which side of this transaction you fall on, it’s important to understand your rights and obligations. It’s generally best to do this at the time of the lease signing. Knowing exactly what you are entitled to and what you must do before you sign on the dotted line can make everything run much smoother when a potential sale or transfer pops up down the line. However, if you did not discuss these issues at the time of signing the lease, you may still find it helpful to talk to a real estate attorney; their analysis can help you protect your rights and avoid breaching your contract.