Understanding Landlord Policies on Business Sale Transfers: Is a 30% Fee Typical?
Selling a business that has an existing lease can be a complex process, often involving negotiations with the property landlord. Recently, a business owner expressed concern over a request from her landlord when attempting to transfer her bakery’s lease to a potential buyer. The landlord indicated that, as a condition for consenting to the lease transfer, the owner must pay the landlord 30% of the sale price of the business. This situation prompts an important question: Is such a fee standard practice in commercial leasing agreements?
The Role of Lease Transfers in Business Sales
When a business operates under a leased property, its sale often involves transferring both the business assets and the lease agreement to the new owner. Typically, the landlord’s consent is required for such transfers, and they may impose certain conditions to protect their interests.
Common Practices in Lease Transfer Negotiations
While the specifics can vary based on location, lease terms, and the parties involved, several common principles generally apply:
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Lease Consent Clauses: Most commercial leases include clauses that specify the landlord’s right to approve or deny a lease transfer or assignment. This consent is usually based on factors like the new tenant’s financial stability and business reputation.
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Transfer Fees and Costs: Landlords may charge fees for processing lease transfers, covering administrative costs or due diligence. These fees are often outlined in the lease agreement.
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Profit Sharing or Revenue-Based Fees: It is less common for landlords to demand a percentage of the sale proceeds as a fee. While some agreements might include clauses for a transfer fee, a 30% cut of the sale price is relatively high and unusual.
Is a 30% Fee Typical?
In most standard commercial lease agreements, fees for lease transfer or assignment tend to be one-time administrative charges, often ranging from a few hundred to a few thousand dollars. Demanding a percentage of the business sale price—particularly as high as 30%—is uncommon and may not be enforceable unless explicitly stipulated in the original lease contract.
Legal Considerations
Before proceeding, it’s advisable for the business owner to:
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Review the Lease Agreement: Carefully examine the original lease to understand any clauses related to lease transfers, fees, or profit sharing.
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Seek Legal Advice: Consulting with a commercial real estate attorney can provide clarity on whether this fee is legitimate and what rights and options are available.
Conclusion
While landlords generally have the
