## Facts

- In November 1974, James Bloor was appointed trustee in the bankruptcy of Invesco Holding Corporation and, through the bankruptcy estate, took title to New York premises subject to a ground lease.
- The ground lease required the tenant to pay stated rent plus “additional rent,” including real estate taxes, water and sewer charges, and mortgage interest and principal, structured to yield the landlord a net rental of about $200,000 per year.
- The tenants had mortgaged their leasehold interest to Chase Manhattan Mortgage and Realty Trust (Chase).
- In April 1976, the tenants failed to meet their obligations under the lease, and Chase began making payments to Bloor.
- In July 1976, Chase took an assignment of the ground lease but did not execute an express assumption of the tenants’ lease obligations.
- Before Chase transferred its interest, it failed to pay certain water and sewer charges that came due.
- In October 1976, Chase assigned its leasehold interest to a third party and stopped making payments to Bloor.
- The lease included language stating that upon termination the tenants would continue to be liable for “additional rent” as it became due.
- In November 1976, Bloor served a notice of default stating he was terminating the ground lease.
- In January 1977, Bloor sued Chase’s assignee for unlawfully holding over and for default in rental payments.
- In February 1977, Bloor and the assignee stipulated that possession would be delivered to Bloor and that the nonpayment claims would be withdrawn; they also agreed the lease could be reinstated if specified payments were made within 60 days.
- In April 1977, possession was delivered to Bloor.
- In August 1977, Bloor asserted liquidated-damages claims against Chase for unpaid rent and additional rent and argued Chase’s October 1976 assignment was fraudulent and should be disregarded.
- Chase moved for summary judgment, arguing its October 1976 assignment ended privity of estate and that, in any event, Chase could not be liable for amounts accruing after Bloor retook possession.

## Issues

1. Whether Chase, as an assignee of the ground lease that did not expressly assume the tenant’s covenants, remained liable for rent and additional rent after it assigned away its leasehold interest.
2. Whether Bloor’s termination and reentry (retaking possession) barred recovery from Chase of rent-like amounts accruing after reentry, including amounts characterized as “additional rent” or liquidated damages.
3. Whether the lease clause stating that “additional rent” remains due after termination could impose post-termination payment obligations on a former assignee whose privity of estate had ended.
4. Whether Bloor could disregard Chase’s October 1976 assignment as fraudulent, absent sufficient proof to treat the transfer as a sham.

## Decision

- The court granted Chase’s motion for summary judgment in substantial part.
- The court held that Chase’s liability to the landlord as a lease assignee was based on privity of estate and was limited to obligations accruing while Chase held the leasehold interest.
- The court rejected Bloor’s attempt to hold Chase liable for rent or additional rent accruing after Chase’s October 1976 assignment to a third party.
- The court concluded that Bloor’s termination and retaking of possession cut off claims for amounts accruing thereafter as “rent” or rent-substitutes against Chase.
- The court did not accept Bloor’s conclusory claim that Chase’s assignment was fraudulent as a basis to extend Chase’s liability beyond the period of its ownership of the leasehold.
- Any remaining potential liability was limited to unpaid items (such as water and sewer charges) that came due while Chase was the assignee.

## Legal Principles

- An assignee of a lease is liable to the landlord on covenants running with the land (including rent-type obligations) only while the assignee holds the leasehold estate; a valid further assignment ends privity of estate and ends the assignee’s future estate-based liability.
- Absent an express assumption agreement, an assignee generally is not in privity of contract with the landlord and is not treated as a continuing obligor for post-assignment rent or similar charges.
- A landlord’s termination of the lease and reentry/recovery of possession ordinarily ends the running of future rent; post-reentry recovery depends on a valid contractual damages theory and an existing contractual relationship, not merely on labeling amounts as “rent” or “additional rent.”
- Allegations that an assignment is fraudulent do not keep a prior assignee liable unless supported by evidence sufficient to invalidate the transfer.

## Conclusion

Bloor v. Chase Manhattan Mortgage and Realty Trust holds that a lease assignee that does not assume the tenant’s contractual obligations is liable to the landlord only for amounts that accrued during the assignee’s period of privity of estate; once Chase assigned away the leasehold and Bloor later terminated and regained possession, Chase could not be charged for rent or additional rent accruing afterward, and unsupported fraud allegations did not extend Chase’s liability beyond its tenure as assignee.


Bloor v. Chase Manhattan Mortgage and Realty Trust, 511 F. Supp. 12 (1979)