The short version
- Buyers of location based businesses treat the lease as critical.
- Landlord approval can take about two months, so start early.
- Look for language that says consent cannot be unreasonably withheld.
- A personal guarantee can outlive the sale unless the landlord releases you.
Why Buyers Care
A buyer of a location based business is buying the spot as much as the company. Without a lease they can rely on, the deal is only equipment. They look at the remaining term, renewal options and rent increases.
Landlord Consent Takes Time
Most leases require the landlord to approve an assignment. Approval has taken about two months in some cases, so ask early. Language that says consent cannot be unreasonably withheld protects your ability to sell.
Rent and Terms
Fixed base rent is easier to value than percentage rent, where the landlord takes a share above sales thresholds. Renewal terms should state the rate, not just market at renewal.
A month to month tenancy or cheap rent with no escalations is not a perk. Buyers underwrite at market rent, which lowers adjusted earnings.
Personal Guarantees
If you signed a personal guarantee, it may survive an assignment unless the landlord releases you in writing. Ask your attorney to negotiate that release as part of the deal.
Lien Subordination
A landlord or a lender may require a lien subordination, which says who gets paid first from the assets if the buyer defaults.
Attorneys negotiate it, and it often gates the loan closing, so start the conversation as soon as you have an accepted offer.
Fix It Before You List
If the lease is short, ask the landlord about an extension with stated rent increases. A buyer who sees a clear term and fixed increases pays more than one who sees a lease that may end next year. Do this before you go to market.
Next Steps
Check how a lender treats a landlord lien in seller notes and SBA loans and see how leases affect a restaurant sale.