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Why Assumption Clauses in Amendments Matter

It is a regular occurrence in the retail real estate world. A letter arrives from your current landlord or tenant advising you of a change in ownership. You probably tuck it in your file and do not consult it again until it is time to renew the lease. When that time comes, what should you do to ensure that your lease reflects this change in ownership? The answer is to include an assumption clause.

What is an Assumption Clause?

An assumption clause is a provision which states that the new landlord or tenant entity (as the case may be) assumes all the obligations of the former landlord or tenant entity and agrees to honor all of the former entity's responsibilities and obligations under the lease.

Why Do I Need an Assumption Clause?

An assumption clause provides the continuity necessary to enforce the original agreement against the new entity. It is essentially a written guarantee from the new entity that it is going to honor the responsibilities and obligations of the entity that signed the original agreement. Without an assumption clause, in the event of a dispute arising under the lease, the new entity could try to claim that the lease is not enforceable against it since it was not an original signatory.

Including an assumption clause in an agreement is a whole lot easier than the alternative, which is to review the purchase documents to confirm the identity of the entity that agreed to assume the lease at issue. Most parties will not want to provide these documents due to confidentiality concerns, making an assumption clause the preferred method.

If a party refuses to provide either an assumption clause or accommodate a review of the purchase documents, then you will need to make a business decision whether to proceed with the amendment at issue. How much of a risk are you willing to take over this particular space? The answer likely depends on the profitability of this location.

In conclusion, an assumption clause should be included as a standard request when negotiating any amendment where the other party to the lease has changed, whether it be by sale of the property, conversion, or merger.

©2020 von Briesen & Roper, s.c


About this Author

Chris A. Jenny, von Briesen Roper Law Firm, Madison, Corporate, Real Estate and Family Estate Law Attorney

Chris A. Jenny is a Shareholder in the Madison office of von Briesen & Roper, s.c. He focuses his practice on representing business owners in a wide variety of niche markets to become more profitable while minimizing their risk and expenses. Chris’s practice has a heavy concentration in the real estate, construction, and information technology industries. This practical experience is a tremendous benefit to the contractors, suppliers, landlords, tenants and real estate developers he represents. Chris’s construction...

William West, von Briesen Roper Law Firm, Milwaukee, Corporate and Real Estate Law Attorney

Bill West is a Shareholder. He Chairs the Firm’s Business Section and the Firm’s Mergers & Acquisitions Section.

Bill is a trusted advisor to his clients and they rely on his ability to achieve desired outcomes in a practical, timely and cost-effective manner – in other words, he gets things done. He has over 30 years of experience in corporate and business related transactions including:

  • Mergers and acquisitions

  • Complex corporate and commercial transactions

  • Corporate governance and business counseling

  • Business formation, strategy and structure

  • Business succession planning

  • Commercial real estate

Bill’s clients are involved in a range of industries, and include public and privately held businesses engaged in a wide variety of domestic and international transactions including asset and equity acquisitions, mergers, reorganizations, divestitures and restructurings.

Bill is also co-chair of the firm’s Retail Real Estate section. He represents clients nationwide in the purchase and sale of commercial real estate. Bill has a national practice handling the retail real estate leasing needs of both tenants and landlords.

Bill is a member of the American Bar Association (member of the Business Law, Real Estate and Taxation sections), and the State Bar of Wisconsin. He is also a co-author of LLCs and LLPs: A Wisconsin Handbook, 1st, 2nd and 3rd Editions, published by the State Bar of Wisconsin.

Bill is recognized by The Best Lawyers in America® as “Lawyer of the Year” for Closely Held Companies and Family Businesses Law in Milwaukee (2017). He is listed in The Best Lawyers in America® for Business Organizations (including LLCs and Partnerships) (2015-2018) as well as Closely Held Companies and Family Businesses Law (2014-2018).

Bill served as Chair and a member of the Board of Directors of Catholic Memorial High School.