Understanding Lease Assignment
- Published on Thursday, 11 June 2015 11:20
- Written by Anthony Rigney
Understanding Assignment of Lease
One of the most overlooked issues when selling or buying a business is the Lease Assignment. Since most businesses rent their real estate the Landlords consent is necessary before a change of ownership can proceed.
It is best to be well prepared for this process. Lease assignments can take anywhere from days to months. The bigger the Landlord typically the longer and more arduous the process. Be prepared to pay an assignment fee. This can run into the thousands of dollars and may or may not be negotiable.
The Landlord will typically require some or all of the following documentation
•Asset Purchase Agreement (buy sell agreement)
•Buyers detailed Financial Statement
•Buyers credit report or permission to obtain credit report
•Buyers Tax Returns (typically a three year history)
•Buyers proof of assets (Bank Statements, Brokerage Statements etc.)
•Detailed business plan covering first 2-3 years of operation
•Articles of Incorporation if the ownership will be held by a Corporation or LLC
It is best to begin collecting these documents immediately. Submitting a complete package to the Landlord not only avoids unnecessary delays but also provides a clear impression that you are organized and efficient. The old adage about “you only get one chance to make a first impression” is so true here.
During the bad years following the financial meltdown of 2008, it was not uncommon for Landlords to grant concessions to new tenants. However in recent years as the economy has improved this has become less common. Still if you do your research and determine that a rent reduction is justified it may not hurt to request one. If a Landlord is willing to be flexible they often prefer to offer a period of free rent rather than a rate reduction.
Another important concern for the assignee is the length of time remaining on the lease. If the location is important and you plan on remaining there you may want to insist on a longer lease or end of lease “options”. These options will give you the right to extend the lease after it expires.
Once the Landlord has reviewed your documentation they will typically request a sit down meeting. This is an opportunity for the Landlord to assess you in person. Treat it as a serious matter. Show up on time and in business dress.
The last step will be for the Landlord to approve the assignee and draft the new lease documents. You may choose to have your attorney review these to determine if they are acceptable. Finally do not forget costs associated with becoming a tenant. In addition to the lease assignment fee you may be required to pay lease deposits as well as first and last month rent. Other ancillary startup costs such as utility deposits, vendor deposits and fees could be required.
The best person to guide you through this entire process is a Professional Certified Business Broker. In Florida the best Business Brokers belong to the Business Brokers of Florida
(BBF). Ask if you Broker is board certified.
Anthony John Rigney PA BCI (Board Certified Intermediary) is a Business Broker living and working in Jacksonville, Florida
Buy a Business In 2015
- Published on Sunday, 28 December 2014 13:50
- Written by Anthony Rigney
Buy a business
Let me help you make your dreams come true in 2015.
As one of Florida’s top Business Brokers I can help you find the right business. There are five things you should know about my services.
As a member of the Business Brokers of Florida I cooperated with over 1,000 active business brokers in this State. That means that when you work with me – you will have access to all their listings.
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I have been a successful business broker for over eight years. I hold the prestigious designation of Board Certified Intermediary (BCI). Prior to becoming a business broker I ran a successful small business for many years. There is no one better equipped to assist you in your search.
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Buy a Business or Launch a Startup?
- Published on Thursday, 13 November 2014 17:38
- Written by Anthony Rigney
Open for Business
Is it better to buy an existing business or launch a startup? The answer may depend on your goals. However In general it is better to buy a business than to start one from scratch. The reasons are varied. First of all buyers often underestimate the true cost of establishing a business. Let’s take a simple retail business for example. Before opening the doors a buyer must
Find a location
Negotiate a lease
Pay for the buildout
Purchase furniture, fixtures and equipment
Purchase inventory, marketing and advertising material
Interview and hire employees
Establish vendor relationships
Obtain licenses and permits
Invest a considerable amount of their time and labor
Once open, the new business has to build a loyal customer base. Most startups don’t show a profit until year two or three. During this time the owner is supporting the business instead of the other way around. The total expense of getting to the point of success will typically be more than a buyer would have paid for a successful established business.
Another reason to buy instead of startup is the high failure rates of new enterprises. Statistics show that by year four 50% of startups are no longer operating. Established businesses with a track record have a much lower failure rate.
Buying a business gives you a functioning and profitable business from day one. You avoid the headaches of a startup but still have the ability to mould the business to your own personality. You are less likely to see your business fail and your investment lost.
There are of course reasons to start up a business. If you have a unique idea and the funds to see it through you may need to build it from scratch. But in general it is better to take over after someone else has done the heavy lifting.
Anthony John Rigney PA is a successful Business Broker. He works with business owners and buyers to accomplish a smooth transition of ownership. For more information call today 904-725-7677