Illinois Court Holds Rent In Arrears Not Assignable

Illinois commercial real estate owners, lenders, and investors should be aware of the Illinois Appellate Court decision in 1002 E. 87th Street v. Midway issued on June 5, 2018. In this case, the court held that when a property is sold the new landlord does not have the right to recover rent that was due prior to the new landlord acquiring the property. The court also held that rent in arrears is not assignable and that these principles bar a claim on the personal guaranty of the lease by the new landlord. This case increases the importance of customary investor and lender due diligence including estoppel certificates. It also means that buyers and sellers of commercial property in Illinois should structure their purchase contracts around the principles held in this case by using credits, prorations and other mechanisms to achieve the underlying economic result the parties seek.