Can the landlord refuse to let me take over the lease?

Often, yes, depending on the lease. Many leases say consent cannot be unreasonably withheld; others give the landlord broad discretion. That is why the landlord's written consent should be a condition of the purchase, and why a broker approaches the landlord with a qualified buyer once there is an accepted offer.

What if the lease is about to expire?

Make a new lease or an extension a condition of closing. Without one, a lender may decline to finance the purchase, and the price should reflect the risk of losing the location.

What to Check in a Business Lease Before You Buy

When you buy a small business you usually take over its lease, and the lease can be worth more than the equipment. It is also where purchases most often fall apart late, after the money has been spent on diligence. Read it before you make an offer.

Reviewed by Tyson E. Sam, Founder and Broker of Record, BreakThru Realty, Florida License 3565210

Can the Lease Be Assigned to You?

Most commercial leases need the landlord's consent to an assignment, and many set conditions: your financial strength, experience in the business, an assignment fee, or a new lease at current rent. Ask for the full lease and every amendment, read the assignment clause first, and make the landlord's written consent a condition of your offer.

How Long Is Left, With Options?

An SBA lender generally wants the lease, including renewal options, to run at least as long as the loan, often ten years for a business purchase. A lease with two years left may cost you the financing, or leave you negotiating a renewal with no leverage. If the term is short, make an extension part of the deal before closing.

The Rent Against the Sales

Rent that is a large share of sales leaves little margin for a new owner. Add the base rent, the common-area maintenance charges, the property tax and insurance pass-throughs and any percentage rent, and compare the total with the sales the tax returns show, not the ones the listing describes. Look for scheduled increases.

The Use Clause and Exclusives

The permitted use must cover what you plan to do: a café lease may not allow a full kitchen, a retail lease may not allow food. Check whether the business has an exclusive (no competing tenant in the plaza) and whether another tenant's exclusive limits you. Changes of use usually need the landlord's approval.

Guarantees, Deposits and Default

Most landlords will ask you to guarantee the lease personally. Ask whether the seller's guarantee is being released, whether the security deposit transfers or must be replaced, and whether there is any unpaid rent or default the landlord could hold against the new tenant.

Ask for an Estoppel Certificate

An estoppel is a signed statement from the landlord confirming the lease is in effect, the rent, the deposit, the term and that there are no defaults. It protects you from learning about a dispute after closing. Lenders commonly require one. Have your attorney review the lease, the assignment and the estoppel before you sign.

Talk to a Business Broker

A licensed BreakThru Realty business broker can read the lease, the financials and the listing with you before you make an offer. Call or text (786) 914-1017.

Questions Buyers Ask

Can the landlord refuse to let me take over the lease?: Often, yes, depending on the lease. Many leases say consent cannot be unreasonably withheld; others give the landlord broad discretion. That is why the landlord's written consent should be a condition of the purchase, and why a broker approaches the landlord with a qualified buyer once there is an accepted offer.
What if the lease is about to expire?: Make a new lease or an extension a condition of closing. Without one, a lender may decline to finance the purchase, and the price should reflect the risk of losing the location.