Things You Should Know About Signing a Lease...

When purchasing an existing company, one of the closing conditions is to be able to either negotiate a new lease or have the landlord assign the existing lease until the time that a new lease can be negotiated at market rates or better if you are a good negotiator.

I had a client 5 years ago purchase a retail business that had been in the same location for over 15 years. The Seller was the landlord as well as the owner of the business. Almost immediately after the transaction closed the relationship went sour. The landlord/seller granted them a 5 year lease with a 5 years option to renew. Of course the recession came after a few years in business and the landlord would not give any concession on the lease what so ever. The buyers were able to move recently after their 5 years were up and moved on to be able to work with a more reasonable landlord who will work with them when tough times return, if they do.

The Landlord will most likely sit on that property with no rent for an indefinite amount of time probably years. If he had been reasonable with the buyers he would have happy tenants for many years to come and have income coming in.

My word of advice before signing with the landlord is to ask questions. Ask what they have done for tenants during tough times. Ask how many people he has foreclosed on or sued in the last 3 years. You need to understand the true colors of the landlord. They of course are running a business and must make a profit. However, if the rent is way above market when things change economically they need to make concessions for you and you need to know ahead of time that will happen. There are definite cycles in the commercial market and if you sign at the top of the market you need to know how they will handle it.

I am in the same situation in our space. As many business, I now have twice as much space as we need due to the fact that two brokers didn't make it during the downturn and have gone elsewhere to find employment. The other brokers are working more from home and do not need the space. I am renting from the "Big Guys" who own most of the space by the SJ Airport. They were not willing to lower rent what so ever and I signed at the top of the market when many landlords would only do 5 year leases. I am counting the days until we can leave and will probably never lease again from the "Big Guys" and I advise new owners to be careful who you lease from.