GETTING A NEW LEASES: WATCH THOSE OPTIONS!
Written By: Mel Jones
Setting yourself up for an exit strategy when you sell your business is paramount whenever entering into a new lease. But don't think that the other broker, who really represents the landlord, is going to design a lease with a good exit strategy. So you need to take care of yourself, or give us a call to help you.
First, always make sure the assignment language is fair. Language such as "won't unreasonably withhold cosent" is what needs to be in the assignment paragraph. Offensive language such as "landlord can withhold consent" for any reason is a sure sign this landlord wants to leverage their lease when and if you sell your business, possibly killing a deal.
Second, the option need to transferrable. This is where some many new tenants fail to understand that landlords aren't your friend and they will stick landmines around every corner of a lease and the option is one of the most natoriuos places - because it is often at the end of the lease and by the time one gets to reading the lease to the end, they've about had it! So the landlord will place language in the option making it personal. This means the option isn't transferrable and it means if the business is sold, the landlord isn't required to transfer the options - and what buyer would pay thousands of dollars for a business with virtually no lease - no one!
But landlords use this as leverage agains a seller of a business. The landlord will says "sure, I'll transfer the option too, but I want an increase in the rent or I want the seller to remain liable on the lease options too and so on.
So don't allow yourself to be sucked into these two exit strategy tragedies that often I see in lease agreements. If you're going to lease a restaurant or for that fact lease any business, let us help you with your exit strategy.
SellingRestaurants is a professional restaurant brokerage firm specializing in the sale and leasing of restaurant businesses for sale. We are the premier restaurant for sale company with locations in California, Arizona, Washington, Georgia. Contact me at 480.274.7000
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