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Lessee Filed Bankruptcy, How Does It Affect Personal Guarantee

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  • 03-17-2011, 10:15 AM
    doc750
    Lessee Filed Bankruptcy, How Does It Affect Personal Guarantee
    My question involves business law in the state of: Maryland

    I own a service station which was leased out to an operator (A). He transferred the lease to operator (b), but signed a personal guarantee regarding the performance of the lease.

    Operator (B) filed for chapter 7 bankruptcy within 2 months of assuming the lease and has no assets. I contacted operator (A) and he does not want to take back the service station.

    DO I have a legitimate case to pursue against operator for the remaining rent due on the lease (runs to 2016).?

    Thank you in advance for your time and input.
  • 03-18-2011, 06:06 AM
    SChinFChin
    Re: Lessee Filed Bankruptcy, How Does It Affect Personal Guarantee
    Quote:

    Quoting doc750
    View Post
    My question involves business law in the state of: Maryland

    I own a service station which was leased out to an operator (A). He transferred the lease to operator (b), but signed a personal guarantee regarding the performance of the lease.

    Operator (B) filed for chapter 7 bankruptcy within 2 months of assuming the lease and has no assets. I contacted operator (A) and he does not want to take back the service station.

    DO I have a legitimate case to pursue against operator for the remaining rent due on the lease (runs to 2016).?

    Thank you in advance for your time and input.

    When you say "transferred the lease", do you mean the lease was "assigned to operator B", but with NO RELEASE of LEASE issued to operator A?? If there is NO RELEASE of LEASE, then the personal guaranty of operator A is still in effect.

    Now, is this a viable business?? My dad was a commercial landlord, and in cases such as this, the business itself has some value. In the case of a barber shop that went out of business, he took over the store lock stock and barrel, first tried to sell it as a standing business, then rented the place out as a fully equipped barber shop.

    You can go after operator A, but as my dad found out, it was easier when he went ahead and rented the place out as a standing business. The only way operator A can pay the rent is to come back and run the business, and he might already be into the next thing, retired, or ill, and may not be in shape to run any business, or it's a money losing business in the first place.
  • 03-29-2011, 10:33 AM
    LyonLegal
    Re: Lessee Filed Bankruptcy, How Does It Affect Personal Guarantee
    It probably depends on the wording of the personal guarantee, but assuming the guarantee is in event of non-payment by B, you can go after A.
    Now you still have a duty to mitigate damages. What that means is basically you can't just leave the place empty. You have to try to get someone else to rent it. Now you have to charge the new person (call him C) a reasonable rent. You can't charge him a dollar. But, if you can't get the same amount now because of the drop in the economy for instance, you rent it for what you can get, then you can bring an action against A for the difference.
  • 04-02-2011, 03:01 PM
    doc750
    Re: Lessee Filed Bankruptcy, How Does It Affect Personal Guarantee
    thank you for the advice.

    I have been speaking with a few lawyer, should be signing a retainer soon. But in the meantime I have listed the property with a broker, and put up a 6 foot "for lease" banner on the building.
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