When a business is purchased by a company/individual and there are existing leases/rentals in place, is the new owner obligated to fulfill said lease/rental agreements?

Our rental equipment was in place at our current customer’s business. he rental lease had gone month to month. The owner sold the business to new owners, who claim they did not know the rental equipment was existing, even though monthly invoices were mailed, along with statements, when necessary. The new owners even paid 2 month’s rental one of the 2 months was split with the previous owner. Now the new owner’s refuse to pay the rental fees. What are our options? And, isn’t it true that when one purchases a company, they purchase all debt with the company? Isn’t it up to the new owner to do their due diligence? We have even had phone conversations with the manager new asking for payment of the rental but he always said he would have to check on it.

Asked on March 4, 2016 under Business Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

Actually, it is not necessarily true that when one purchases a company, one becomes liable for all its debts, obligations, and contracts. If the company is an LLC or corporation and the buyer buys the actual LLC or corporation, the company remains liable, because it is still the same legal entity which signed the contracts or incurred the debt. But if the company was not an LLC or corporation, or it was, but the buyer only purchased the assets, not the entity, then the business post-sale is a new legal entity and is only obligated to those contracts and debts it chooses to take on.


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