S Corp - Closing business, o/s lease, no personal gurantee - help?!

[ebenavi]

What is the name of your state?After 28 years in business, my father-in-law's Art & Frame shop is losing money. He is unable to sustain his overhead and has decided to liquidate and close the business at Jan-end. He still has 1.5 years left on his current lease (renewed 5 yrs ago or so) and his landlord had informed him that she intends on holding him to his remaining obligations until she can find a replacement tennant. I believe he is the sole officer of the business formed as an S Corp and he did not give the landlord a PG.

What is the best way to resolve the remaining lease time? What protection does the S Corp. provide him? Can the landlord come after him personally?

Thanks,

Son-in-law in New York


What is the name of your state? New York

 

[LdiJ]

What is the name of your state?After 28 years in business, my father-in-law's Art & Frame shop is losing money. He is unable to sustain his overhead and has decided to liquidate and close the business at Jan-end. He still has 1.5 years left on his current lease (renewed 5 yrs ago or so) and his landlord had informed him that she intends on holding him to his remaining obligations until she can find a replacement tennant. I believe he is the sole officer of the business formed as an S Corp and he did not give the landlord a PG.

What is the best way to resolve the remaining lease time? What protection does the S Corp. provide him? Can the landlord come after him personally?

Thanks,

Son-in-law in New York



What is the name of your state? New York

I would have to read the actual lease to be certain, however its fairly standard language in commerical leases for the tenant to be obligated for the full amount of the rent until the lease expires or the unit is re-let to someone else. In addition, there may be other expenses for which your father in law would be responsible.

You would have to go back to the very first lease to be certain that he didn't sign a personal guarantee. Most renewals are amendments to original leases rather than brand new leases in their own right.

Have your father in law take his original lease, and the renewals to a real estate attorney to get an opinion. Unless someone can actually review that paperwork, you aren't going to get accurate advice.

 

[cheapo]

If the tenant leaves after informing the landlord of his intentions and after the tenant has made every effort to sublet, wouldn't the landlord be obligated to attempt to find a new tenant, otherwise when the landlord sues the tenant for the last 1.5 years of the lease, the tenant might be able to claim in court a 'failure to mitigate' by the landlord? Probably not much of a defense.

 

[HomeGuru]

If the tenant leaves after informing the landlord of his intentions and after the tenant has made every effort to sublet, wouldn't the landlord be obligated to attempt to find a new tenant, otherwise when the landlord sues the tenant for the last 1.5 years of the lease, the tenant might be able to claim in court a 'failure to mitigate' by the landlord? Probably not much of a defense.

**A: both parties are obligated to mitigate damages, but in the event no new tenant can be found, the former tenant is not off the hook.

 

[cheapo]

I agree that the tenant would not be "off the hook", and still may have to come up with a lot of money to get out of the lease.

What is the obligation of the landlord, after the tenant breaks lease early and turns in the keys back to the landlord? By the landlord accepting the keys, would this be the same as the landlord accepting the 'surrendering of the property' by the tenant? After the surrendering is the landlord then obligated to maintain the property at his/her expense or will these fees just be included in whatever amount the tenant will be sued for by the landlord?