Inheriting Tenants in Default?

87th Street first argued that the original lease gave 87th Street standing to sue. Its second argument was that the assignment provisions transferred to it the right to receive accrued rent from the previous owner. In response, Midway argued that 87th Street did not have standing to bring suit for the unpaid rent because 87th Street was not the owner of the property at the time when the past due rent accrued. Midway also argued that the assignment provision should be held invalid because the previous landlord could not have intended to assign its rights to collect unpaid rent to the succeeding landlord.

Standing

In order to have standing in a case, the plaintiff must have an interest in the action and the potential outcome. Unifund CCR Partners v. Shah, 407 Ill. App. 3d 737 (2011). Generally, a landlord has standing to sue for unpaid rent. Dasenbrock v. Interstate Restaurant Corp., 7 Ill. App. 3d at 302 (Sept. 1, 1972). It also remains undisputed that the conveyance of property includes the conveyance of a lease along with the rights to receive rent. However, the new landlord does not obtain rights to pursue past rent that was due prior to the landlord's owning the property. 87th Street pointed to a provision in the lease which stated that “[n]o failure of landlord to exercise any power *** or to insist upon strict compliance *** and no custom or practice of the parties *** shall constitute a waiver of Landlord's right to demand exact compliance with the terms ***.” 87th Street made the point that, as landlord, it should be able to enforce the lease through this non-waiver clause regardless of the previous landlord's inaction to collect the unpaid rent.

Despite this clause in the lease, the lower court, in a decision affirmed by the appellate court, ruled in Midway's (tenant's) favor, stating that 87th Street only has standing to sue for delinquent rent owed to it that has accrued after acquisition of the property by 87th Street. The court emphasized that a demand for compliance with the lease does not create a new right to collect rent due before the landlord seeking the back rent was the owner of the property. The court further noted there are presently no cases which state that a new owner can use a non-waiver clause to enforce a tenant's obligations to a previous owner. In short, the ruling in the case meant that 87th Street has no standing to sue for unpaid rent under the non-waiver provision in the lease.

Assignment

87th Street next pointed for its argument to an assignment of lease provision, which stated that the“[t]enant agrees to attorn to such new owner.” Additionally, the lease provided that all liability and obligations “shall be binding upon the new owner.”