Landlord’s failure to give seller/tenant a cure notice did not get the seller/tenant off the hook for the repair obligation.
M&A Stories
January 11, 2023
Introduction
Lots of the purchase price for a supermarket chain is for the stores and distribution centers.
The deal
The seller in this deal went into bankruptcy and sold its New York City supermarket chain. One deal involved the sale of the 5 stores and a warehouse. The bankruptcy court decreed that the buyer purchased this real estate free of all claims.
The lawsuit
One of the claims against the seller in bankruptcy was the landlord $2 million claim for repair to the warehouse. The seller objected to the landlord’s claim, arguing that the landlord had failed to give the seller a “cure notice” to make the repairs as required by the lease. The seller was technically not in default under the lease without the cure notice.
The bankruptcy court rejected this technical argument: “a default exists under … (bankruptcy law) … whenever the … (seller) … has failed to perform its obligations under its … lease, regardless of whether that failure amounted to a default as defined by the … lease.
See In Re Old Market Group Holdings Corp., Case No. 20-10161 (PB), (Jointly Administered)., United States Bankruptcy Court, S.D. New York, (December 13, 2022).
Comment
The seller also tried to stick the buyer with the repair obligation. The court rejected the seller’s attempt because the court had approved the sale to the buyer free of all claims.
By John McCauley: I write about recent legal problems of buyer and sellers of small businesses.
Email: jmccauley@mk-law.com
Profile: http://www.martindale.com/John-B-McCauley/176725-lawyer.htm
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Check out my books: Buying Assets of a Small Business: Problems Taken From Recent Legal Battles and Selling Assets of a Small Business: Problems Taken From Recent Legal Battles
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