With rent typically being the second largest expense after salaries for small businesses, the property lease becomes a very important document if you are thinking about selling your business.

When was the last time you reviewed the lease on your business premises? When you signed it years ago? The following aspects of your lease should be reviewed before selling:
  • Is the lease transferable to a new owner?
  • Is there a transfer fee involved?
  • What does the Landlord require to approve the new owner on the lease?
  • Is there an option to renew the lease after the current term?
  • When does the Landlord have to be notified to renew?

A lease is a contract that represents the right to operate a business from rented premises. It is a legally binding contract between the landlord and the tenant. It sets out the terms, conditions and rights as well as the obligations of both parties in relation to the occupancy.

Before selling a business make sure the lease can be transferred or renegotiated. You want to get this part of the sale process done relatively early. Landlords don't like surprises. A deal can fall apart quickly if a Landlord is informed at the last minute that a new owner is about to take over the current business. It is better to work with the Landlord to iron out the details before you get too far into the deal. Determine the Landlord's willingness of renewing or transferring the lease to a new owner and what qualifications of such new owner are expected.

Also of importance is how much time is remaining on the lease and whether there are any extension periods. The purchaser would want to evaluate the lease to determine what impact it might have on the future viability of the business.

The proper time to involve the Landlord would be when a contract to purchase the business is in place and is likely to work out. But the examination of your lease should take place prior to putting the business on the market.