Assignor Not Bound by Lease Amendments Made After the Assignment

What Happened: A tenant assigned its lease for commercial office space in Texas to its corporate sibling. The landlord and new tenant then amended the terms of the original lease. After evicting the new tenant for nonpayment of rent, the landlord sued the old tenant for the new tenant’s violation of the lease amendments. The old tenant denied responsibility for the breaches since the amendments were made after it assigned the lease and without its signature or consent. The lower court sided with the landlord, citing language in the original lease stating that “No assignment or subletting, whether or not with Landlord’s consent, shall ever relieve [Old] Tenant of any liability hereunder.”

Ruling: The U.S. Court of Appeals for the Third Circuit reversed the ruling.

Reasoning: The court held that under Texas contract law, an assignor of a contract that’s later amended without its consent isn’t liable for its assignee’s breach of the new obligation in the amendment. Although there was no case specifically addressing the issue, the court noted that appeals courts in Texas “have consistently held that an assignor’s liability on an assigned lease results from the assignor’s privity of contract with its initial contract counterparty.” There was no such privity in this case. Nor was there evidence that the old tenant’s failure to object implied consent to the lease amendments made after the assignment.

• In re Rgn-Grp. Holdings, LLC, 2024 U.S. App. LEXIS 6098, 2024 WL 1110385