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'Piercing the Corporate Veil' with Respect to Monetary Claims Against Commercial Tenants

By Alexander Lycoyannis

In order to shield themselves from liability for business debts, business owners often set up corporations or limited liability companies through which they conduct business affairs. In keeping with such purpose, these corporate entities are often signatories of commercial real estate leases. Frequently, however, landlords obtain money judgments against corporate tenants for unpaid sums due under such leases, which judgments turn out to be uncollectible.

In some cases, landlords have persuaded courts to “pierce the corporate veil,” so as to recover such sums from a corporate tenant's creditworthy parent entity and/or principal(s). In other cases, courts have refused to pierce the corporate veil, thus prohibiting a landlord's ability to pursue anyone other than the signatory tenant for debts arising under a commercial lease. This article discusses when a court will, or will not, pierce the corporate veil.

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