The lease is an important issue and, in many cases, a major issue.
Whether you are buying or selling a business, it’s important to understand
that, if the real estate is not included, the lease is a critical lement
of the sale process.
There are three ways the transfer of the lease can be handled:
- A new lease- A new lease can be entered into buy the lessor and the
- A sub-lease- This can be negotiated between the seller and the
buyer. In a sub-lease, the seller of the business becomes the landlord.
The exsisting landlordmust always approve the sublease.
- The Assignment of the Lease- This is the most common method of
transferring the lease. The seller simply assigns the existing lease
to the buyer. The buyer assumes responsibility fot the lease, and in
most cases, the landlord must approve the assignment. Sellers should
be aware that, in most cases, they are still responsible for the terms
of the lease.
Sellers should take a look at the lease on their business and ask themselves
the following questions:
- Is the lease long enough and the rent low enough to make the business
attractive to a potential buyer?
- Is the rent consistent with similar businesses in the area?
- Are there any terms or conditions of the lease that might be unfavorable
in the eyes of a potential buyer?
- Are you on good terms with the landlord- and can the lease be
transferred without any hitches?
Your business broker is a good source to review the lease and its terms
from a business sale perspective.
(This information was taken from the Today’s Business Scene newsletter
copyright 2001 Business Brokerage Press)