How To Get Landlord Cooperation To Sell Your Business

 Step 1: Sooner is better than later.

 Business sellers often tell their brokers that they’d rather wait till a buyer is obtained, before having that conversation with the landlord about assigning the lease. The seller may fear that the landowner will tell others that the business is for sale, and the word will get out to customers and employees. Or the hesitation may be based on the notion that the “landlord/lady discussion” is not needed unless and until a willing and able buyer is found. Most brokers will tell you that by putting off this necessary step, both seller and broker run the risk of wasting a lot of time, energy and money devoted to marketing the business, and then finding out the property owner won’t cooperate with the sale.

 Step 2: Landlord meeting is a sales opportunity.

Most sellers and many brokers approach the property owner rather tentatively, and then plead for some cooperation so the business can be sold. It’s not uncommon for that request to be met with the question: “Why should I?” or “What’s in it for me?” Chances of a positive outcome are much better if the seller and broker use a more positive approach, pointing out that a new buyer will bring renewed energy and enthusiasm to the business, which is so important in these difficult economic circumstances, and a real benefit for the lessor, if rent is based, in part, on a percentage of the business’ revenues. If there is some concession that would please the lessor--for example the business owner agrees to be responsible for power washing the building, removing the weeds in the parking lot or setting up recycling bins--this promise could be granted in return for the land owner’s agreement to cooperate with a sale.

 Step 3. Tenant know your rights

 While most leases grant the landowner the right to withhold his or her approval to a transfer from one tenant (seller) to another one (buyer), the provision “…approval will not be unreasonably withheld…” usually is also included. If the buyer of the business has the same or greater financial and managerial ability compared to the seller, it will be hard for the landowner to justify a refusal to consent to a lease assignment. A real estate attorney should be consulted on this point and the seller should consider whether to threaten a lawsuit to force the landlord to comply

Step 4. If a new lease is required.

 If the current lease has several years to run, the conversation with the landowner will focus on getting his or her consent to an assignment.  But what if only a year or two remain? The business may need a new lease in order to be marketable. That’s the issue to discuss with the landowner.  If he or she is opposed to writing a new lease--one that can then be provided to the buyer, it might be necessary for the seller to consider other options, such as a going-out-of-business sale. If it is the rental amount that worries the landlord/lady, a new lease could be drawn up which provides the tenant options to renew for extended periods, with the rent amount to be renegotiated at each option renewal date.

 Step 5. Avoid surprises

 One business broker suggests finding out if the “landlord” actually owns the property or has a master lease and is subletting to the business owner. That is commonly what happens in gas station businesses. An oil company might lease a station to an owner/operator, but once the underlying agreement between the oil company and the actual landowner expires, the gas station owner will lose his or her rights. It’s a good idea to become informed about who owns what rights to the property.

 Yes, landlords and landladies can ruin a tenant’s plans to sell the business, but there are things a seller--and seller’s broker--can do improve their chances of success. In any case, the sooner the matter is brought up with the lessor, the better.

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 About The Author:  Peter Siegel, MBA is the founder of BizBen.com - a niche website listing over 9000 small business for sale listings. Mr. Siegel is a national consultant and author who has written three books on the top of selling and buying small businesses