Expert: Dennis Herman - 11/28/2008

Question
I have been in my current office in Los Angeles County for over 7 years.  My lease ran out 3 years ago and I have been paying month to month and always on time.  I agreed to a rent increase in March.  I am in the business of selling my practicea which may take a few months.  The lessor wants me to sign a new lease with much more stringent terms.  I am paid up for over a month and my old deposit gives me over 20 days.  How much notice is the Lessor require to give me and how long can I stay?

Answer
My business model does not include leases on rental property but I will provide you with the information I have.  

Generally when renting property for a business there are two main reasons to enter into a long term lease.  The first being, the amount of money spent on improvements to the property.  This could range from a store front to equipment used to run the business.  The second reason concerns building a client base.  Many businesses rely on the neighborhood for stability.  Relocating can have a negative effect on income both in investment terms and temporary loss of business.  

There may be a number of approaches to the lease you may consider.  

Converting the month to month lease to a long term lease.

Consider contingencies the property owner may accept.  The long term lease may be contingent upon you selling the business and transferring the lease.  If you do not sell within a year the lease is null and void and converts back to a MTM.

You may want the party buying the business to negotiate the lease directly with the property owner.  In which case the offer to purchase for the business may be contingent upon the new business owner obtaining a lease based on, make sure the offer to purchase contains some general terms outlining the new lease terms so you have an idea they are not asking for unrealistic terms and wasting everyone's  time.

If you are on a month to month lease, those are the terms.  The property owner can give you a one month notice, and generally you will need to give a one month notice.  The exact terms should be on the lease agreement.

You mat also want to get an attorney to represent you in the sale of the business.  They will also be able to answer your questions on the lease after reviewing the paperwork.

Depending on the business there may be issues that need to be cleared before a sale can take place, such as an environmental study.  Another good reason to have a good real estate attorney.

You may also want to use a good real estate agent to market the business.  Make sure you look at a number of their existing listings.  Read the descriptions to determine if they have what is takes to sell a business.  Make sure they have experience with selling a business.  It is different than selling a home.  They should have the ability to write a good description of your business so that it appeals to potential buyers.  They should also ask you for information on income and business costs.  A good agent will have this information ready.  An investor will need this information to make an educated decision.  If the information is missing the investor may not give the business a second look.  Always be prepared for the unexpected.  That is why is it wise to put together a strong, experienced team to help you on this project.