It may be your dream to own your entire business right down to the land where it sits, but if you’re like most business owners, you are currently leasing your business space. When was the last time you looked at your lease and brushed up on its details?
Don’t underestimate the importance of knowing your commercial lease. Sometimes, the information hidden in the fine print can make or break your business! Here’s what you need to know.
Lease terms have caused countless business sales to fail. It is possible that your existing building lease contains clauses that can complicate the terms of your sale or make it impossible altogether.
Assignment and Subletting
The authority to assign and sublet a restaurant is often restricted to the landlord. You should expect to seek your landlord’s approval before initiating negotiations, though some leases do contain the term “permitted transfer” to allow for sales without landlord consent.
Renewal Options and Periods
Most restaurant leases require business owners to renew a lease no more than 180 days prior to the termination of the current lease term. This puts you into a position of having to exercise your renewal option in a relatively short period of time, which then puts you at risk of getting locked into battle with your landlord over a lapsed lease and lost option rates.
Commercial leases differ dramatically from residential leases, and it’s important not to make assumptions on the benefits and protections of your lease. Most notably, commercial leases lack the consumer protections of residential leases. This is because protection laws don’t govern commercial leases the same way they govern residential agreements. There are no caps on security deposits and no rules protecting tenant privacy, for instance.
Furthermore, commercial leases aren’t always based on a standard form or agreement. This means they are customized to each specific business. If you don’t closely read your lease agreement before signing, you might lock yourself into impossible, long-term, binding terms.
It’s wise to ask a business broker like Tampa Business Broker to review your lease contract before you sign or, if it’s too late for that, before you make plans to sell. Call (813) 750-0275 to start working with Tampa Business Broker and obtain the professional support and expertise you need to sell your business quickly and effectively.