Any procedures when commercial tenant is selling their business?

Question

Hey everyone,

I've got a commercial property, and a tenant is looking to sell his business, which would basically mean the business (a store) stays there, but is under a new owner. The lease is with the business entity.

Is there anything I need to be aware of, or things I have rights to? Like for example, what if the new owner wouldn't normally meet screening criteria?

My understanding is that the property owner needs a written document about the transition happening.

Is there any standard procedure (e.g. I can screen them as if they were a new applicant before it's allowed to go through) I can do here, to stay safe? Or is that kind of thing stipulated entirely in the existing lease, with no overarching regulation? (I'm about to go double check the lease, but wanted to put a feeler out there)

Also, since I haven't done it before (in this special case or just in general): When screening a new commercial tenant, can all the same tenant screening services used for regular rentals (e.g. mysmartmove) be used, or does it have to be a special thing specifically for commercial property, even if the business that's applying doesn't have a history, and is a new business?

Thanks much!

Wayne Brooks · Answer

Yeah, this likely wouldn't be "an assignment of lease" or sub leasing, as the buyer is likely buying the "business entity", so the tenant wouldn't actually change. Any personal guarantee that is in place could remain, or be negotiated out.

Dale Shin · Answer

The snippets of the lease you mentioned are quite short and not enough to see if it will cover you to do the full investigation on the buyer of the business. Definitely consult with your attorney, if you have one.

Tamas Z. · Answer

Yup, it's in there, specified as part of the lease assignment section.

The main points seem to be:

• Not without written consent of Lessor
• ... which will not be unreasonably withheld

So yeah, looks like it's there, but that "unreasonably withheld" is kind of vague. I was hoping to find something very clear online about what it actually means more specifically, but am having no luck.

So normally, under that standard languaging, if consent is requested to assign a commercial lease, does "performing a standard screen/background check on the new would-be tenant, as if it were a completely new application for an unoccupied space" count as something I can legitimately do? Or is there basically a loophole that would allow someone I normally would screen out to get grandfathered into a lease?

Thanks again!

Martin Z. · Answer

Most leases, landlord needs to approve any type of subleasing or lease assignment. Read your lease.

Dan Wallace · Answer

I am not sure what recourse you have in regards to your lease. Did you require a personal guarantee or have some sort of due on sale clause similar to what a commercial promissory note would have? Depending on the lease you used your document may have a transfer of ownership clause or something similar which requires your consent.

If you do not have a personal guarantee or some sort of material change or adverse change provision, I am not sure what recourse you may have with the sale of the business operation.

Any procedures when commercial tenant is selling their business?

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