Page 12 - NBIZ JUNE 2024

If Your Tenant is a Partnership your tenant. At the very least, the landlord should review
When dealing with partnerships, the landlord must the tenant’s last year’s tax return and current financials.
determine whether or not the signature line must be Confirm that these financial documents belong to your
executed by all partners or only a representative of the proposed tenant. Do some work to determine if the pro-
partnership. A resolution of the partnership should be spective tenant is a tenant you want in your building.
delivered to you prior to allowing an individual to bind a
partnership. Prudent landlords will request a copy of the
partnership documents to determine who has authority to Landlords - Have Regular Checklists
bind the partnership on the lease. You have your tenant properly identified and signed
Although landlords want personal liability when up on the lease. Now what? Other possible issues involve
they can get it, nothing is wrong in doing a lease with a the original tenant disappearing during the tenancy. You
startup company as long as you have additional security. have a properly signed lease; now management should
The best practice is to insist on the tenant providing follow up on any change in the tenant’s identity or sig-
a personal or corporate guarantee from someone with nage that indicates another individual or company is in
financial strength. possession of the lease space. Too many times I have seen
tenants who are not the same company or individual that
originally signed the lease occupying a lease space.
Figure Out Who the Tenant is In two recent cases, the discrepancy created problems

Before you begin drafting the lease, figure out who for the landlord when the cases were presented for
will be the tenant. It is best to obtain the information as collection. Those cases involved tenants that sold their
soon as the tenant applies for the lease space. Landlords businesses to new parties after executing the leases.
should request the following documents for identifica- The new parties took possession of the leased premises
tion: a driver’s license, social security card or number, without obtaining authorization from the landlord or
assumed name certificate, partnership agreement, ever assuming the obligations under the lease via a
certificate of formations, operating agreements, bylaws, valid assignment. The result is that the new company
or certificate of corporate resolutions giving authority would not be liable to the landlord for any rents other
for the officer to sign on behalf of the corporation, and/ than rentals owed for the period of time the company or
or a certificate of good standing from the comptroller’s individual was in possession of the lease space.
office of the Secretary of State. These documents should In most cases, the original tenant either dissolves or
be followed up with requests for financial documents for files for bankruptcy protection and/or sells its business to
the new company without authorization or approval from
the landlord. If the landlord is not aware of this transfer,
the new tenant would not become liable for the future
obligations under the terms of the lease unless it specifi-
Often, tenants claim to cally assumed those obligations from the original tenant
be a company, yet all or the landlord. When you do not have a signed contract
or assignment document for the new tenant, the landlord
documents indicate loses the right to enforce future obligations under the
lease document.
the tenant is an lists that include confirming that the tenant has not
The landlord’s management team must have check-
individual changed. Requesting annual insurance certificates and
except actually reading them to confirm the original tenant is
still your tenant is just one way to stay on top of things.
for the signature line. If you see name changes on rent checks or signage, start
asking questions. N
Landlords want Brian D. Womac is a licensed attorney in Texas
personal liability since 1985 celebrating 39 years of active practice in
commercial real estate law. He has been board-certified
whenever they can in commercial real estate law for thirty (30) years (1991-

get an individual 2021) and has personally handled over 3,000 litigation
matters in the State of Texas. His client base consists of
to sign and/or corporations, partnerships, limited liability companies,
lending institutions, insurance companies, investors,
guarantee a lease. management and leasing companies, and others owning
commercial real estate.

12 NBIZ ■ JUNE 2024