Buying A Business Lease Agreement – 3 Things You Must Do BEFORE You Sign It

 

The Real Estate Lease Agreement – as it pertains to buying a business.

3 Things you MUST do BEFORE You Sign It!

If you’re looking to buy a business, one of the most overlooked, misunderstood documents is the commercial real estate lease agreement.

This one document can destroy a good business!

It can sap you of your life savings and it can be the reason you loose everything that you own. Let’s talk more about lease agreements as it relates to buying a business.

 

First things first, where in the buying process should you receive a complete and up to date copy of the lease agreement? 

OK you’ve found an interesting business for sale and you’d like to learn more about it. You’ve reached out and you’ve signed a Confidentiality Agreement. You should now get an information package on the business opportunity and it is in this information package you should get a complete copy of the lease agreement.

Keep in mind if the business has multiple locations, you need a complete copy of the lease agreement for reach and every location.

If you’re being told there’s only old an old lease agreement available – this is a red flag – come on what use is an old lease agreement to anybody?

So let’s talk about the 3 things you MUST do when it comes to lease agreements…

 

1. READ THE LEASE AGREEMENT YOURSELF!

The lease agreement is a legally binding document between you and the landlord. You need to read the entire document and be sure you understand 100% of it, before you sign it!

Never have someone else to read it for you. I’ve know realtors and lawyers make comments like “yerr it’s a standard lease agreement” where clearly it was detrimental to the business and the success of the business owner. Never have anyone else read it for you. Please please read the document yourself!

 

2. What if there is something you don’t understand?

While the lease agreement can be a really dry read – it should all be in plain english.

If you come across a section that simply makes no sense, is in latin, or is overly complex, this could be a sign that something funky is going on. In such a situation, you need to request a written explanation of the section in question.

If the explanation does not make sense, you need to seek the advice of a lawyer who has the knowledge and experience to comment on lease agreements.

 

3. Understand ALL The Fees

You need to be clear on ALL the fees associated to the lease agreement. Basic Rent is just one of many fees you will be responsible for. Ask the business owner for a recent monthly breakdown of fees and costs the property has cost the business, you’re contemplating on purchasing.

Be aware of all fees associated to transferring the lease from the business owner, over to you. The landlord may even charge a fee based on the sale price of the business. These fees can be huge and it is one area that can really kill a business sale.

I want to be clear on one final point. A bad lease – a bad landlord – can destroy any business!

Listen, there are one or two real scumbag landlords out there. Landlords who have horrible reputations. Do your research – you need to know exactly who you’re dealing with.

 

So let’s summarize the discussion.

  • Read the entire lease agreement YOURSELF – BEFORE you sign it!
  • Be sure you clearly understand every aspect of the agreement.
  • Be clear on ALL the fees, and potential fees, associated to the lease.
  • Do your research on the landlord!

Remember, a lease agreement is a legally binding document! If you sign it, you agree to all the terms within it!

 

Thank you for taking the time to read my article on Lease Agreements – as it pertains to buying a business!

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