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    KILALA's Avatar
    KILALA Posts: 14, Reputation: 1
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    #1

    Apr 17, 2011, 01:10 PM
    New restaurant lease
    I am buying the restaurant business. Owner is retiring after 10 years business. The business is so so. Their lease is up with another 5 years option left. Seller offered us with 5 years lease. It sounds like I will use their lease option to assume.

    I have not contact the landlord yet.
    Of course I am not interested in at all if I have only 5 years lease.
    I plan to sell my business after 5 years.

    So can I negotiate with landlord for the new lease term for 10 years plus option?
    Or I take 5 years lease and negotiate for option 5 years.





    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,305, Reputation: 7692
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    #2

    Apr 17, 2011, 01:22 PM

    You can do with the lease anything that the property owner will agree to, so yes to all of them if the owner of the property agrees.

    Also you may only assume the existing lease if the current lease has a clause in it that allows you to.
    KILALA's Avatar
    KILALA Posts: 14, Reputation: 1
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    #3

    Apr 18, 2011, 08:50 PM
    Comment on Fr_Chuck's post
    OK. I will contact the property owner and negotiete the term of lease.
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,305, Reputation: 7692
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    #4

    Apr 18, 2011, 09:02 PM

    What books on the business have you reviewed ? Why are they selling ? Have you reviewed their tax records as to what they are claiming as profit or loss ?

    Also why a plan to sell business in 5 years
    AK lawyer's Avatar
    AK lawyer Posts: 12,592, Reputation: 977
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    #5

    Apr 19, 2011, 07:10 AM
    Quote Originally Posted by KILALA View Post
    ...
    So can I negotiate with landlord for the new lease term for 10 years plus option? ...
    Sure, you can negotiate with the landlord for virtually any concession he/she/it will agree to.


    Quote Originally Posted by KILALA View Post
    ...
    Or I take 5 years lease and negotiate for option 5 years.
    That would not be a very good idea. You would be throwing away a valuable bargaining chip before you even went to the table. Right now, you can negotiate with the LL with a strong argument which would go something like this: "Look, I'm not interested in buying the restaurant with only a 5-year lease. But if you will give me an option to lease it for the extra 5 years, I might be interested."
    KILALA's Avatar
    KILALA Posts: 14, Reputation: 1
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    #6

    Apr 19, 2011, 10:49 AM
    Comment on Fr_Chuck's post
    They are older couple's in turned 60 yrs and go back to their country to retire. Their lease is up so they can just close the restaurant. But when they built, they spent over 500K for improvement. The restaurant interior is good condition, pretty much update kitchen. I checked the tax record on SCC(State corporation commission) and good, make profit to cover the expense.The reason why I want to sell in 5 years that I want to sell my portion and move to Hawaii I hope.
    KILALA's Avatar
    KILALA Posts: 14, Reputation: 1
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    #7

    Apr 19, 2011, 11:24 AM
    Comment on AK lawyer's post
    When I submitted the LOI, I did included the clause with the satisfy the lease term. So now, who I should contact. Listing broker or landlord directly?
    AK lawyer's Avatar
    AK lawyer Posts: 12,592, Reputation: 977
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    #8

    Apr 19, 2011, 05:34 PM
    Quote Originally Posted by KILALA;
    When I submitted the LOI, I did included the clause with the satisfy the lease term. So now, who I should contact. Listing broker or landlord directly?
    If the LL is acting through a broker I would contact the broker.
    KILALA's Avatar
    KILALA Posts: 14, Reputation: 1
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    #9

    Apr 27, 2011, 08:36 AM
    We contacted broker then the seller's attorney and he is not comfortable for us to discuss the lease to landlord until we sign the sales agreement.

    Is this common things in the restaurant lease?

    Right now they offer us 5 years lease. But we would like to have 5 years option to come along.
    LisaB4657's Avatar
    LisaB4657 Posts: 3,662, Reputation: 534
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    #10

    Apr 27, 2011, 11:39 AM
    I wouldn't sign a sales agreement until I knew what the landlord would be willing to do. I would have a clause included in the sales agreement stating that the agreement is conditioned on the landlord agreeing to a 5 year lease and a 5 year option.
    excon's Avatar
    excon Posts: 21,482, Reputation: 2992
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    #11

    Apr 27, 2011, 12:01 PM

    Hello k:

    I was going to chime in earlier...

    The reason you're hesitant about buying, is because you may not have a long enough period to make your money back. If that's true for you, it's going to be true for your potential buyer.

    Therefore, if you want to have anything worth selling after five years, you not only need a 5 year option, you need a SECOND 5 year option.

    excon
    KILALA's Avatar
    KILALA Posts: 14, Reputation: 1
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    #12

    Apr 28, 2011, 07:38 AM
    Comment on LisaB4657's post
    Thanks.
    KILALA's Avatar
    KILALA Posts: 14, Reputation: 1
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    #13

    Apr 28, 2011, 07:41 AM
    Comment on excon's post
    Is this mean, 5 years lease with two 5 years options?
    excon's Avatar
    excon Posts: 21,482, Reputation: 2992
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    #14

    Apr 28, 2011, 07:52 AM
    Quote Originally Posted by KILALA View Post
    Is this mean, 5 years lease with two 5 years options?
    Hello again, K:

    Yes, and even a 5 year option in perpetuity. It's good for the landlord too. He can easily sell his building with a thriving restaurant on the premises, if that's his reason for not wanting to offer a long lease...

    But, you've got other problems to handle. Evidently, they want you to buy a pig in a poke... In other words, they want you to BUY first and find out what you BOUGHT later...

    In the FIRST instance, people who do that, aren't good people to do business with... One of these people is your prospective landlord.

    excon

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