If you are a business renting commercial space, few situations are more disruptive than having the landlord sell the property out from under you. Suddenly, your comfortable lease agreement and working relationship with the owner are thrown into question. Will the new buyer honor the existing lease? Do they plan to redevelop the property or convert it to another use? As a tenant, you can proactively protect your interests when your rented commercial property goes up for sale. This guide will help you navigate a commercial property sale from the tenant’s perspective.
Get to Know Your Existing Lease Terms
Carefully review your current commercial lease agreement to understand the protections it does or does not provide should the property sell. Key areas to focus on include:
Transfer Clause
Does the lease specify that it transfers to a new owner if the property is sold? What rights does the new owner have regarding the lease?
Termination Clause
Under what conditions can the new owner terminate your lease upon purchase? Typical reasons include plans to redevelop, convert use type, or occupy the space themselves.
Relocation Clause
Can the new owner force you to move to a different space? If yes, are there parameters protecting the quality, size, and location?
Rights of First Offer or Refusal
Do you have any rights to purchase the property or match competing offers? Even if you cannot realistically buy it yourself, these clauses provide leverage in negotiations.
If your existing lease does not provide adequate protections around sale or transfer, try to negotiate amendments with the landlord before they officially list the property.
Communicate with the Landlord
Maintain open communication with your landlord to stay informed on the property sale process. Ideally, the landlord will be transparent about their plans to sell and introduce you to potential buyers who visit the space. Use it as an opportunity to showcase how you have invested in improving the space and are a model, stable tenant. Make sure prospective buyers have your contact information to reach out with questions versus making assumptions about your lease, business, and future plans.
Meet with Prospective Buyers
Schedule meetings with serious prospective buyers to feel them out and make your pitch for why they should keep you on as a tenant. Share details on your business, customer base, and community ties. Provide historical sales or traffic numbers to showcase how you drive visitors to the property. Outline the investments you have made to improve the space and why it would be costly for a buyer to convert it to another format or layout. The more background and face time you have with a buyer, the harder it will be for them to make drastic changes affecting your lease after closing.
Hire a Commercial Real Estate Attorney
Work with a qualified commercial real estate attorney to fully protect your business interests before, during, and after a property sale. An experienced real estate lawyer can answer your questions on lease terms, analyze any new lease agreements a buyer may want you to sign, and handle negotiations around renewals, terminations, or relocations. Think carefully before signing any new lease paperwork from a new buyer without having your attorney thoroughly review it first. The right legal guidance provides essential leverage whether you want to stay put or need help exiting the lease.
Review All Notices from the Landlord or New Owner
Carefully and promptly review any notices you receive from the landlord or new property owner referencing changes to your lease terms. There are usually strict response deadlines outlined should you want to reject or renegotiate new lease conditions after an ownership change. An attorney can advise if the notices and timeline for responding adhere to commercial leasing regulations and the terms of your existing lease.
With adequate preparation and legal support, your business can safely navigate a commercial property sale from the tenant’s side. Arm yourself with knowledge of your current lease, build rapport with buyers, and lean on an experienced real estate lawyer whenever revised terms or relocation arise. Protecting your interests upfront prevents major business disruptions down the road.
Get Expert Guidance from a Tenant Representation Specialist
Navigating the complex legal and operational issues surrounding a commercial property sale can be overwhelming for tenants focused on running their business. Lee Segal, founder of Segal Commercial real estate firm, has over 30 years of experience representing tenant interests and negotiating favorable outcomes around leased property transfers. Lee counsels small business owners on proactively preparing when their building goes up for sale and deftly handles talks with buyers around honoring or enhancing existing lease terms.
If you are a commercial tenant concerned about an impending property sale, contact Lee Segal at Segal Commercial today for a free consultation.
