Parent Company Not Responsible for Tenant's Rent

A lease barred a corporate tenant from assigning its lease without the owner's consent. The tenant's shareholders sold their shares to Corporation B (Corp. B), a subsidiary of Corporation C (Corp. C). The tenant didn't formally notify the owner of the sale. Later, the tenant became insolvent and Corp. B took over the space.

Although the owner knew that Corp. B was in the space, the owner did not receive formal notice of the change other than a name change on the tenant's rent checks. Corp. B later experienced financial problems and stopped paying rent. Corp. C asked the owner for assistance in finding a new tenant for the space and to release the tenant from the lease.

The owner placed for-rent signs and a newspaper ad, the costs for which were reimbursed by Corp. B. The owner sued Corp. C for rent due under the lease. Corp. C argued that it was not responsible for the rent, because it was not the tenant's assignee.

A California appeals court dismissed the owner's lawsuit. The evidence didn't indicate that Corp. C had agreed to an assignment of the lease. The evidence, however, indicated that the owner had received rent checks from the tenant and later from Corp. B, but not from Corp. C.

Also, Corp. B, not Corp. C, paid the costs associated with finding a new tenant for the space. And only the tenant and later Corp. B had possession of the space.

• Masellis v. Addus Healthcare: No. F049956, 2007 Cal. App. Unpub. LEXIS 619 (Cal. Ct. App. 1/25/07).