Avoid complicated consent to assignment language in your billboard lease.  That’s the lesson of Atkins Media Group vs Del Val Realty Group.  Here are the facts:

• Atkins Media entered into a lease with Del Val Realty Group to permit Atkins to put a billboard on land owned by Del Val.
• The lease required Atkins to obtain the consent of Del Val to any assignment of the lease.  To obtain consent Atkins had to submit the following for the assignee:
  • 3 years financial statements
  • the effective date of the transaction
  • the assignee’s legal name
  • the identity of the assignee’s owners if public
  • the assignee’s officers and directors
• Consent to assignment was not required if Atkins was acquired by another entity so long as the new entity “shall have tangible net worth and industry experience equal to or greater than Atkins and shall assume in writing the obligations of Atkins under this Lease.”
• In April 2018 Atkins agreed to sell its  assets to CCP Outdoor Holdings, a new company.  Atkins notified Del Val that is was selling all its assets to CCP and requested consent to assignment.
• On May 28, 2018 Atkins sent Del Val another request to consent to assignment together with the legal name of CCP, the executives of CCP and and a net worth calculation for CCP.
• On May 31, 2018 Del Val notified Atkins that it had not complied with the lease assignment provisions because it had failed to provide financial information for CCP.  That same say Atkins and CCP provided an income statement for CCP for April 2019 and a balance sheet for CCP for February 2018  and a detailed biography of the managers of CCP.
• On June 7 Del Val said it would consent to the assignment so long as the lease was changed to include a minimum capital requirement, a requirement that the sign become Del Val’s on termination of the lease or insolvency of CCP, and an increase in rent to 80% of the previous three months cashflow to allow CCP “to demonstrate its confidence in its own ability to sell and perform” on the sign.
• Atkins and CCP consummated the sale of assets and the assignment of the lease on June 14, 2018.
• In November 2018 Atkins filed suit saying that Del Val’s consent was not necessary to the assignment of the lease.
• A lower court ruled in Atkins favor concluding that the asset purchase agreement was a transaction for which consent was not required.
• An appeals court reversed the decision, stating: “we cannot look at this transaction and conclude – without greater information – whether Atkins and CCP Outdoor entered int a transaction “similar’ to a merger, reorganization or consolidation.  In addition there is nothing in the information submitted by Atkins to Del Val at the times it notified Del Val of the anticipated assignment to suggest that CCP outdoor had “equal” or “greater” industry experience than Atkins.”

Insider’s take:  Complicated lease assignment language is a lawsuit waiting to happen and gives your landlord an excuse to increase rent in exchange for consent.  The best assignment language should say that no consent to assignment is needed so long as the new party to the agreement to be bound by all terms and conditions of the lease.

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