What does it mean to assume a lease when buying a New York business?

As is often the case when purchasing a small business, the business owner will be leasing its space from the building’s owner. So, in addition to purchasing the assets of the business, (As I discussed in a previous post, it is almost always preferable to purchase a business’ assets rather than purchasing its stock.) the purchaser will need to take over the seller’s rights under their lease. This is accomplished through an “Assignment and Assumption of Lease” in which the seller assigns or transfers their rights as a tenant under the lease to the purchaser, who in turn, assumes the seller’s obligations under the lease.

Most commercial leases require the landlord’s consent to such an assignment and assumption so the asset purchase agreement must be contingent upon obtaining such consent. The lease may further condition the landlord’s approval upon the payment of certain fees and the creditworthiness of the purchaser. It is important that the asset purchase agreement adequately address these issues.

Lastly, since the purchaser will be assuming all the seller’s obligations under the lease being assigned, it must be carefully reviewed before entering into the asset purchase agreement.

About George H. Dippel, Attorney at Law

George H. Dippel has been practicing law for over 30 years. He is a graduate of Cornell Law School and a former partner at the law firm of Rivkin Radler in their real estate/banking department. Mr. Dippel opened his own law offices in 1993 in Bayside, Queens, New York. Mr. Dippel has assisted thousands of clients throughout Queens, Brooklyn, The Bronx, Manhattan, Staten Island, Long Island and Westchester with their wills, probate, trusts, real estate and business matters. In addition to practicing law, Mr. Dippel has taught real estate courses in Long Island University’s paralegal program. He is also a licensed real estate instructor and has taught real estate licensing courses in the New York Metropolitan area. Mr. Dippel is admitted to practice in all New York State Courts and the Federal Eastern and Southern District Courts.
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