The short version
- Buyers of location based companies treat the lease as critical
- Landlord approval has taken about two months in some deals
- Prefer fixed base rent and a stated renewal rate
- Seek a release from any personal guarantee when you assign
Why the Lease Comes Up First
If your customers come to a place, the place is part of the product. A buyer wants to be sure they can stay. A month to month lease with no escalations may feel easy, but it is a red flag when you sell.
Below Market Rent Is Not a Perk
Buyers price rent at market. If yours is low, they adjust earnings downward, and the price drops with them. That affects you at closing, not only the buyer afterward.
Clauses That Help
- Assignment language saying consent cannot be unreasonably withheld
- A fixed base rent instead of a share of sales above set thresholds
- A renewal rate written out, not left as market at renewal
- Enough years left to satisfy a lender
Start the Conversation Early
Sellers often wait until a buyer is signed before they ask the landlord anything. That is a mistake. A landlord who needs weeks to review a buyer can hold up the whole closing, and a lender may not fund until consent arrives.
Ask your attorney to read the assignment clause before you list. If it is weak, there may be room to fix it while the landlord still has reason to keep you happy.
Landlord Approval and Liens
Landlord approval can take around two months, so ask early. A landlord or lender may also want a lien subordination, which decides who takes the assets first if the buyer defaults. Attorneys negotiate it, and it often gates loan closing.
Personal Guarantees
A guarantee you signed can outlive the sale and the closing of your company. Negotiate a release from the landlord as part of the assignment, and ask your attorney to confirm.
If You Own the Building
Treat the real estate as another business asset, valued on its own terms. Options include selling both to one buyer, keeping the building and becoming the landlord or selling it separately. Many buyers cannot also buy the property, so plan for that.
Unrepresented owners often leave money on the table by never setting a market rate lease. A broker can compare the paths.
What to Gather
Pull the signed lease, every amendment, the latest rent statement and any notices from the landlord. A buyer and a lender will ask for all of it, and a missing page slows the process.
Where to Go Next
Read how this plays out for a restaurant, and see owner benefit for the earnings side. Then request a valuation.