If an apartment complex goes into foreclosure and is bank-owed and then sold to a 3rd party, does the new ownership assume contracts that the bank signed?
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If an apartment complex goes into foreclosure and is bank-owed and then sold to a 3rd party, does the new ownership assume contracts that the bank signed?
In my case the bank’s management company signed a 2 year deal that constituted monthly payments of which the bank’s management company paid 6 months. Once sold the new ownership continued to pay for the next 5 months. I then received a letter discontinuing service in 2 months. Has the new ownership assumed the contract or is there some precedent that the contract responsibility was transferred to the new ownership?
Asked on August 1, 2013 under Business Law, Arizona
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 10 years ago | Contributor
Leases, if any, entered into by the bank *after* foreclosure would still be in effect (lease pre-dating foreclosure are wiped out by the foreclosure). However, non-lease contracts would only be assumed (taken over by) the new owner who bought from the bank if the new owner specifically agreed to take over those contracts--it is not automatic. That said, even in the absence of explicit agreement, it may be that the new owner's demonstrated practice of continuing to pay for 5 months would show/demonstrate their assumption of the contract and its obligations--this is not a given, and it's not at all clear you'd win on this argument, but as a general matter, it is a valid, viable argument you could make if you chose to contest the discontinuance. (Though note: if the contracts the bank signed had any early termination provisions, the contract coud be terminated in accordance with said provisions.) You should consult with an attorney who can review the facts and the contracts in detail to evaluate the strength of any argument you might have that the new owner effectively took over the contract. If it's not worth the cost of an attorney, it's most likely not worth fighting this, anyway.
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