$114,00 Rent Bill for Buyer of Lease at Bankruptcy Auction

April 1, 2003

After a tenant filed for bankruptcy, its lease was sold at a bankruptcy auction. The buyer was assigned the tenant's lease rights and liabilities. When the buyer stopped paying rent, the owner sued it for rent due. But the buyer argued that, since it neither took possession of the space nor indicated its intent to do so, it never became obligated to pay rent.

After a tenant filed for bankruptcy, its lease was sold at a bankruptcy auction. The buyer was assigned the tenant's lease rights and liabilities. When the buyer stopped paying rent, the owner sued it for rent due. But the buyer argued that, since it neither took possession of the space nor indicated its intent to do so, it never became obligated to pay rent.

A Tennessee appeals court ruled that the buyer was obligated to pay rent under the lease and ordered the buyer to pay the owner more than $114,000 in rent due, and more than $13,000 in attorney's fees plus interest. The court said that when the buyer bought the lease and the lease was assigned to the buyer, the buyer then became “obligated to pay rent in accordance with the terms of the lease” [Cherry v. First State Bank].

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