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LOOKING FOR A RETAIL LEASE...USE CAUTION!

Jul 16, 2010
Article #59
Author: Mel Jones

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As a restaurant broker, we often get restaurant owners whose business is in trouble on many fronts but the primary reason for the trouble is the bad lease they got themselves into because they failed to seek a professional help of a lawyer and restaurant broker from the on-set of their negotiation with the landlord and the large commercial real estate brokerage firm that doesn't have the tenants' best interest at heart. 

Recently I had a client who asked me to review a lease prepared by a major national commercial brokerage firm where the agent claimed to represent the tenant as well as the landlord.  The issue from the start of the lease is the agent represents both the landlord and the tenant, which is in itself a conflict when the agent is being 100% compensated by the landlord and probably has many other properties listed listed with the landlord. 

In this case, my client didn't want to personally guarantee the lease and the agent told my client he wasn't personally guaranteeing the lease when in fact he was.  The lease had my clients' personal name on it. My client told me the real estate firms' agent had told him he wasn't personally guaranteeing the lease because the agent had inserted a paragraph on the lease stating "there are no guarantors" on the lease.

I had to quickly point out to my client that (1) by the simple fact his name was on the lease he was personally guaranteeing the lease and (2) the language used about "no guarantors" on the lease meant there is no one outside of this lease guaranteeing the lease.  He was shocked to learn he had been misled.

I see these sort of misleading points coming from large commercial brokerage houses all the time and they only become issues when when the restaurant owner is in trouble.

I had another client who used another large commercial brokerage firm to negotiate his lease.  It was a BIG lease - $25,000 a month rent.  The agent failed to protect the client from common area charges (CAM) and before the client knew it, he was paying $2 a Sq. Ft. (6,000 Sq. Ft.) in CAM charges and there was nothing he could do about it because the agent failed to point out language in the lease allowed the landlord to pass all the landlord's costs to the existing tenant base.  The center had empty spaces and all the other tenants had to eat the costs.

So if you're trying to negotiate a lease with a large commercial brokerage house, be careful because that commercial broker's interest is with the landlord and not you.  They have a number of listings with that landlord, so who do you think they are truly representing?

I have several articles about how to negotiate a lease.  Look them up. Educate yourself before you get into trouble!


                                                                                                                                                                                                                                                       

We at SellingRestaurants feel obligated to educate the public, our customers and our clients with information that can help them make more intelligent buying and selling decisions. 

Mel Jones is one of the premier restaurant brokers in the nation having published hundreds of articles on buying and selling a restaurant and bar business, selling thousands of restaurants in CA., WA and AZ and building one of the most copied business models in the brokerage industry.  Mel started SellingRestaurants in 2004 with the one simple concept, give the buyers the information they need to make intelligent buying decisions without being pestered by a broker or hiding information, prepare the business for market by researching key details that make or break deals and educate the buyer on the buying process to create an intelligent buyer.  Prior to SellingRestaurants, Mel was a Chief Financial Officer for Universal Music Group, the largest music company in the world.  There he participated in more than $11.5 billion of merger and acquisition transactions.  He also work for top companies such as Nestle Foods, USA. He hold a Bachelors in Business Administration Finance as well as attened Law School at Gonzaga University.  Give Mel a call at 480.274.7000 or e-mail him at [email protected] if you have any questions. 


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