How important is the term of the lease?

The lease terms are certainly importance for any business. Could I determine my interest level in a business based on current lease terms alone? No. Some buyers get hung up, during our first phone call, on the remaining term of the lease. There are pros and cons to everything in life, and it is no different here.

Today, we are more likely than not going to find a lease that is above current market rates. Would it be a benefit to a buyer to have this premium rate locked in long-term? Of course not. The biggest benefits to a buyer to have a long-term lease in place is if the lease terms were below market (not too likely), if the location is crucial to the businesses success, or if it would be cost prohibitive to move.

Regardless of the remaining lease term, a buyer should always have a lease contingency in their purchase offer. If you use a standard California Association of Business Brokers form, there are checkboxes in the lease contingency paragraph for either a) buyer obtaining a new lease, or b) buyer getting an assignment of the lease.

When the buyer has fully assessed the businesses viability, they will be in a position to determine if they want the lease assigned, as is, or if they'd like a new lease. In today's environment, landlords do not have the upper hand in negotiations. Landlords will still be stubborn, and will still kill transactions, though now more than in recent years you are likely to come across a more humble landlord, and you will hopefully get a new or restructured lease which will save you money and help the business be more profitable.