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Commercial Lease Review And Negotiation

Commercial LeaseReading Time: 3 minutes

Upon sale of a business, the buyers often assume that the real estate is part of the business. In most cases, however, the seller does not own the physical building that their business is being run from. There is generally an agreement in place with the owner of the building, which upon selling the business, will be converted into another document. The commercial lease agreement is between the owner and the seller, while the commercial lease assignment will be between the buyer and the owner. The assignment is a legal document that transfers the business owners’ interests in the commercial lease, over to the buyer. A commercial lease is an important part of your business and negotiating a favorable lease that suits your business, could lead to its success.

When Selling A Business

As a seller, you need to ensure that the commercial lease agreement frees you of all responsibility once the business has been sold. There are certain things to be done and taken into consideration before selling the business.

  • The Landlord Has Rights

    Notification should be given to the landlord when you plan to sell your business. The original commercial lease agreement is between the landlord and the seller. Most commercial leases require the Landlord’s permission and consent to any assignment. Therefore, before the commercial lease assignment can be established it needs to be reviewed and approved by the landlord. If you wait too long before telling the landlord and they do not approve it, you risk losing an interested buyer and wasting time finding a new one.

  • Read the Original Lease

    Sellers should understand the terms and conditions of the lease, legally binding them to the landlord. This reiterates what the buyer is getting into and what charges the seller and buyer will have to pay to the landlord upon a sale and transfer or assignment of the lease.

  • Hire An Attorney

    If it is your first time selling a business, it is always a good idea to seek professional help. The attorneys at Gary I. Handin, P.A will work with the landlord and the buyer to try and settle on an agreement. They will review the current lease agreement to determine what you will receive and what you will lose as a business if the sale goes through.

When Buying A Business

The landlord prepares the lease agreement, in the best interest of the landlord. Your responsibility as a prospective tenant is to make sure you read and understand the lease agreement and ask for changes that will benefit you.

  • The Length of the Lease is Important

    An agreement of one to two years for a small business, with an option to renew is a good deal. It does not trap you but allows you to stay if it works for your business. If you have a business that is location dependent, namely a restaurant then a longer term provides more security.

  • Research Rent

    Educate yourself on the going rent price for the area so you can negotiate a price that is reasonable and commensurate with other similar properties in the same geographic locale. Make sure rent increases are discussed and capped to avoid any surprises.

  • Gross Lease or Net Lease

    Take note of if it is a gross lease or a net lease. A gross lease is one where all costs are included, while a net lease is one where any other costs will be separate from your base rent, for example maintenance costs, real estate taxes, insurance and water usage.

  • Favorable Clauses

    Negotiate favorable clauses that benefit you, such as a clause preventing the landlord from renting another space on the same property to a business similar to yours.

Buying or selling a business involves legalities, with terms that could make your head spin. Hire a trustworthy attorney from Gary I. Handin, P.A to make sure you understand fully the terms and conditions involved before buying or selling.

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Law Offices of
Gary I. Handin, P.A.

Providing professional legal services for the city of Coral Springs. Contact us today for a free consultation – 954-796-9600.

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