A commercial tenant in BC occupies space under a 10-year NNN lease with 5 years remaining. The landlord sells the building. What happens to the existing lease?

Q: What is the correct answer to: A commercial tenant in BC occupies space under a 10-year NNN lease with 5 years remaining. The landlord sells the building. What happens to the existing lease?

The correct answer is The lease runs with the land and is binding on the new owner, who must honour all existing lease terms for the remaining 5 years. Option B is correct because under BC property law, a registered lease (or even an unregistered lease where the tenant is in possession) runs with the land and is binding on subsequent purchasers. The new owner steps into the previous owner's position as landlord and must honour all existing lease terms for the remaining 5 years. This principle protects commercial tenants from arbitrary displacement when properties change ownership.

Q: What background knowledge is needed for this Commercial Real Estate question?

The principle that leases run with the land is fundamental to property law in BC and all common law jurisdictions. For commercial real estate: registered leases automatically bind new owners; unregistered leases bind new owners if the tenant is in possession; the new owner assumes all landlord obligations (maintenance, TI allowances, options); and all tenant rights are preserved (renewal options, expansion rights, exclusivity clauses). This principle makes commercial leases a key component of investment property valuation — the quality, term, and rate of existing leases directly determine the property's income and value.

Q: What is a good way to remember the answer to this Commercial Real Estate question?

Remember 'Lease Runs with the Land' — when a building sells, the lease stays. The new owner inherits all landlord obligations and the tenant keeps all rights for the remaining term. When the exam asks about the effect of a building sale on existing leases, recall 'Runs with the Land' — the lease continues unchanged, binding the new owner to all existing terms.

Q: What exam tip applies to this Commercial Real Estate question?

This is a fundamental property law principle tested frequently. The lease survives a building sale. The new owner must honour all terms. The lease does not terminate, convert to month-to-month, or require renegotiation.

Q: How does this Commercial Real Estate concept apply in real world practice?

An investor purchases a commercial building in Victoria for $5 million. The building has a 10-year NNN lease with a national retail tenant at $200,000/year with 5 years remaining, including a 5-year renewal option. Upon purchasing, the investor is bound by all lease terms — they cannot raise the rent, change the lease structure, or remove the tenant for 5 years. The tenant's renewal option must also be honoured. This predictable income stream is exactly what made the property attractive as an investment.

Question

Commercial Real EstateBCHARD

A commercial tenant in BC occupies space under a 10-year NNN lease with 5 years remaining. The landlord sells the building. What happens to the existing lease?

Answer Options

A

The lease is automatically terminated upon sale

B

The lease runs with the land and is binding on the new owner, who must honour all existing lease terms for the remaining 5 years

C

The tenant must renegotiate with the new owner

D

The lease converts to a month-to-month arrangement