Negotiating commercial leases: Buying a business?
Wednesday, June 20, 2018
For many commercial tenants, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing his own business, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.
Tenants may go through the leasing process only two or three times in their entire lifetime — yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for a commercial tenant as the amount of rent he or she pays will directly affect the entrepreneur’s financial bottom line.
Whether you are leasing a new for the first time or negotiating a lease renewal for your business, here are some tips:
Buying a business?
It has been our experience that the average person does not fully consider the lease agreement that he/she is taking on. For the purchaser, this is a good opportunity to improve the situation by trying to negotiate better lease terms.
All Offers to Purchase for a business should be subject to final lease approval. You can speak with the landlord about renewal options and the purchaser’s right to eventually sell the business at a future time.
Selling the business?
Whether you sell the shares or the assets of your business, getting landlord permission to assign the lease as part of this is almost always necessary.
If you currently have a personal guarantee on your lease agreement, you may still be responsible for the lease if the purchaser defaults. Look into this carefully since you must attempt to have yourself released from future liabilities.
If this cannot be done, try to set up the deal so the purchaser is signing a new lease to either supersede or replace your current lease agreement.
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