A new lease is usually one of the more critical issues during a business ownership transition.
This fact causes some people to start the process of purchasing a business with the lease negotiation. The reasoning is usually that if an acceptable lease cannot be negotiated, the transaction won’t work for the buyer.
This is usually a mistake.
The best way to deal with this critical component of the ownership transfer is as a contingency in the written offer.
We generally have three contingencies in all offers.
1) the due diligence period.
2) Negotiating a lease with terms acceptable to the buyer.
3) Loan approval.
All three contingencies allow the buyer to cancel the offer with no penalties resulting in a full refund of their escrow deposit.
It has been our experience that until the due diligence period is complete any item no matter how small can stop the process and trigger cancellation and refund of deposit. Sometimes the buyer doesn’t find anything wrong, they just develop a reluctance to move forward as the initial excitement wanes.
Negotiating new leases is often complex and involves negotiations, financial statements, personal guarantees, etc.
It has been our experience that a buyer that has been through the due diligence process and is committed to completing the transaction has more leverage with the lessor than one that does not. Resulting in more successful negotiations for all concerned.
Richard Roberts, ABI is the Senior Managing Broker at AEGIS Business Brokers, LLC and holds an Accredited Business Intermediary classification by the American Business Brokers Association and is a member of the International Business Brokers Association, International Franchise Professionals Group, Chambers of Commerce, Committees and Volunteer Organizations. Contact Richard at 479.689.4455 or email@example.com.