October 2026: first publication.
The deed is recorded. The tenants kept paying. The rent roll came across with the closing binder and nothing about the building suggests a document is missing. That is exactly the point at which a Washington buyer usually discovers what the deed did not carry.
A sale conveys the reversion. It does not by itself move the seller’s contract rights under the leases, and the difference between those two things is the difference between suing a tenant and suing the person who personally backed that tenant.
At a glance
- Where a seller conveys the reversionary estate without contractually assigning rights under the lease, the buyer may enforce only those lease covenants that run with the reversion (Peyton Building, LLC v. Niko’s Gourmet, Inc.).
- The benefit of a tenant’s promise to pay rent is treated as incidental to the reversion, so it reaches rent falling due after the conveyance.
- In Peyton, the court held the benefit of a personal guaranty of the tenant’s default did not run with the reversion, because as a promise to pay money it does not restrict the use of the funds to the benefit of the property.
- Washington law makes every special promise to answer for the debt, default, or misdoings of another person void unless it, or a note or memorandum of it, is in writing and signed by the party to be charged or by someone that party lawfully authorized (RCW 19.36.010).
- Washington law requires every conveyance of real estate, or any interest in real estate, to be by deed (RCW 64.04.010).
Does buying a commercial building make you the landlord under the existing leases?
In part. A buyer who takes the reversion is ordinarily the landlord in fact, but where the seller conveys a reversionary estate in leased premises without contractually assigning rights under the lease, the buyer may enforce solely those lease covenants that run with the reversion.
- In Peyton Building, LLC v. Niko’s Gourmet, Inc. the buyer took the building by purchase agreement and was not an assignee of either the lease or the guaranty, and the Court of Appeals concluded the trial court had correctly acknowledged the buyer as de facto landlord.
- The court held that a grantee in that position may enforce solely those lease covenants running with the land, or more accurately with the reversionary estate.
- The benefits of a lease covenant run with an estate if they touch and concern it, which they do where they are connected with the use and enjoyment of the estate and enhance its value.
- The court treated standing and real party in interest status as analytically distinct but intertwined, and addressed them together.
- A conveyance with no assignment of lease rights leaves a buyer who is the landlord for some purposes and a stranger to the contract for others.
Exception: A written assignment of the leases and their collateral agreements changes the analysis, because the buyer then holds those contract rights directly rather than only the ones that run.
According to Peyton Building, LLC v. Niko’s Gourmet, Inc., 180 Wn. App. 674, 323 P.3d 629 (Div. III, decided April 24, 2014), Washington Court of Appeals, Division Three, as of September 2026.
Buyers hear “de facto landlord” and read it as a win. The problem: it describes your position on the property, not necessarily your position on the paper. In Peyton the buyer was the landlord of a restaurant space on a ten year lease signed in 2002, with monthly rent scheduled to rise from $7,933 to $8,171, and still lost the part of its summary judgment that rested on the guaranty. Being the owner was never in question. Being the promisee was.
Which lease promises transfer with the building and which do not?
Promises that touch and concern the reversion transfer with it. A promise to pay money that does not restrict the use of those funds to the benefit of the property does not.
| The promise | Does it run with the reversion? |
|---|---|
| The tenant’s promise to pay rent falling due after the conveyance | Yes. The court called this well settled and incidental to the reversion |
| The tenant’s promise to occupy the premises continuously and operate them as a restaurant | Yes. The court said it touches and concerns the land in a physical sense |
| A personal guaranty of the tenant’s default, signed inside the lease document | No in Peyton. As a promise to pay money it does not restrict the use of the funds to the benefit of the property |
| A landlord’s promise to refund a security deposit, on the burden side | No. Peyton relied on Mullendore Theatres, which held that burden did not run with the reversion |
| A clause stating the lease benefits all of the seller’s successors in interest | Not on its own. In Peyton the guaranty benefit still did not run despite that language |
Exception: The court reached the guaranty question only by assuming, for the sake of argument, that no horizontal privity of estate was needed for the benefit to run, and it set out authority pointing the other way, so a running-covenant argument does not rest on settled ground in every configuration.
According to Peyton Building, LLC v. Niko’s Gourmet, Inc., 180 Wn. App. 674, 323 P.3d 629 (Div. III, decided April 24, 2014), Washington Court of Appeals, Division Three, as of September 2026.
The line the court drew is not about how important a promise is. It is about what the promise is attached to. Rent and continuous operation are tied to the building, so they travel with it. A guaranty is not just a second promise to pay, but a promise by a different person whose money was never pledged to the property, and that is why it stays where the seller left it. Read your rent roll and your guaranty file as two separate assets.
Does the successors and assigns clause in the lease cover it?
Not on its own. In Peyton the lease purported to fully benefit all of the seller’s successors in interest, and the buyer still could not enforce the personal guaranty on summary judgment.
- The court concluded the benefit of the guaranty does not run with the reversion because, as a promise to pay money, it does not restrict the use of the funds to the benefit of the property.
- The buyer’s estoppel and ratification style argument, that the guaranty sat in the lease attached to the amended complaint, that the guarantor admitted the copy was true, and that the tenant had acquiesced in a landlord-tenant relationship on those terms, was rejected because the buyer cited no supporting legal authority.
- Washington law makes every special promise to answer for the debt, default, or misdoings of another person void unless it, or a note or memorandum of it, is in writing and signed by the party to be charged (RCW 19.36.010). The statute addresses the guaranty promise itself; it does not say what form an assignment of an existing guaranty must take.
- The court stopped short of dismissing the guarantors, since they had not moved for summary judgment themselves, and allowed the buyer to present further facts and argument on remand.
Exception: A guarantor who signs a fresh writing at or after closing, or a guaranty drafted to run in favor of the landlord’s successors and backed by an assignment, presents a question Peyton did not decide.
According to Peyton Building, LLC v. Niko’s Gourmet, Inc., 180 Wn. App. 674, 323 P.3d 629 (Div. III, decided April 24, 2014), Washington Court of Appeals, Division Three, as of September 2026.
A successors and assigns clause is standard in commercial leases and many buyers read it as the assignment. It is not a magic wand. The clause records what the original parties intended; it does not decide whether the benefit of a particular promise is capable of running with an estate, and on the guaranty in front of it the court answered that second question against the buyer, which had cited no authority addressing the point. One boilerplate sentence in a 2002 lease did not survive contact with a 2011 default.
What should the assignment at closing actually cover?
Washington law requires the conveyance of the real estate itself to be by deed. The seller’s contract rights under the leases and guaranties are moved by a separate written assignment drafted at closing, rather than assumed to travel with the deed.
- The leases themselves, each identified by tenant, suite and date, together with every amendment, side letter, renewal option and expansion option.
- Every guaranty, assigned by date, tenant, guarantor and obligation, and where the transaction allows it, a consent or reaffirmation signed by each guarantor. In our experience a guaranty is the lease-related right most easily left out of an assignment schedule.
- Security deposits, prepaid rent and letters of credit, with the money actually transferred or credited at closing rather than referenced, since the burden of a landlord’s promise to refund a deposit was held not to run with the reversion in the decision Division Three followed on this point.
- Rent accrued and unpaid as of closing, stated as a dollar figure and assigned expressly. Peyton describes the running covenant as reaching rent due after the conveyance; treating pre-closing arrears as something to assign is a closing-practice conclusion drawn from that, not a holding of the case.
- Tenant estoppel certificates and attornment, where the purchase agreement, the lender, or the leases call for them. We typically see these settle a disagreement about lease terms before it starts, because each tenant states in writing what it believes the lease says.
Exception: This list is closing practice rather than a statement of Washington statutory requirements. A ground lease, a recorded memorandum of lease, a lease pledged to the seller’s lender, and a tenant already in bankruptcy each add requirements it does not reach.
According to RCW 64.04.010, Washington State Legislature, as of September 2026.
The assignment is one of the least expensive documents in the transaction and one of the easiest to leave to the last afternoon. What to do instead: pull the guaranty file during diligence, list every guarantor by name in the assignment, and ask for a signature from each of them while the seller still has a reason to help you get one. Naming the assignment in the letter of intent puts it on the list from the first page of the deal.
Where the gap usually shows up
A missing assignment rarely announces itself at closing on a commercial property. It surfaces later, on the first tenant default that matters, when the rent claim proceeds and the claim against the person who personally backed that tenant does not. The buyer in Peyton won a summary judgment of $104,558.08 plus costs, and the Court of Appeals reversed it, sending the guaranty, the rent owed, and the lien credit back to the trial court.
K&S Canon assists Seattle commercial property buyers and owners with acquisition diligence, assignments of leases and guaranties, and lease enforcement after closing. Call 206-507-4009 or reach the firm through the K&S Canon contact page.