If you are preparing your business for sale your lease is a key element. Ideally you have a lease with a favorable rate and lots of life left before expiration. But here's a question you may not want to answer. When was the last time you read your lease? In all probability it's been a long time and there may be some unpleasant surprises hidden deep in the lease.
Recently I've had two experiences in dealing with leases that haven't been pleasant.
In the first the seller's lease, which was expiring, had a provision that should he sell the business he would owe the landlord 10 percent of the sales price. The seller knew about about the provision, but he expected the business to be worth a great deal more than he paid and he was willing to accept the provision. Sadly, it was worth a great deal less. A new lease for the buyer ran 32 pages, contained multiple duplications and, initially, required that he maintain property insurance on a building that contained more than a dozen other tenants. We later learned the landlord paid $3,800 to have the lease drafted.
I am now working with a seller and we have the business under contract. He has a great lease, but when I asked when if he was familiar with the provisions of the lease he admitted he hadn't read it since he signed it almost three years ago. I had the duty to inform him that he was required to pay the landlord $1,000 to consider an assignment of the lease and another $2,000 if they approved the transfer.
I don't know that any of these provisions could have been changed when the initial draft of the lease was presented. I do know that if you don't ask, you don't get. Landlords often don't have the upper hand in this business climate and it doesn't hurt to try to negotiate. While the amount of the lease is important there can be other provisions that may have a huge impact when you consider selling your business.
While it may be advisable to have an attorney review a proposed lease there is no substitute for reading it yourself.
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