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Transferring of Nursing Home Operations Upon Lease Termination

This is just a cautionary tale for lessee’s returning nursing homes to a lessor or new operator upon lease termination.  Earlier this month, a jury in Texas found that an affiliated tenant and subtenant of two nursing home facilities violated their leases and conspired to defraud the landlord before returning the facilities upon lease termination.  The Court found that when the landlord was unwilling to sell the properties to the tenant, the tenant and subtenant fraudulently transferred or discharged residents, terminated Medicare agreements and vendor relationships, removed supplies necessary to operate the facility and caused key employees to leave.  A jury then awarded the landlord nearly $5 million in actual damages and $2.7 million in actual and punitive damages.  Rebecca Ann Inc., Donald Grether and Paul A. Heining v. Sunset Nursing Homes, Inc. v. Plantation Health Care Inc.

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