The Elephant (Landlord) in the Room

You’re selling your business. You’ve got an interested buyer, your books are (mostly) in order, and you’re already picturing yourself in Tuscany drinking wine you can't pronounce. Then, out of nowhere, a figure emerges from the mist: your landlord.

Ah yes, the landlord. The oft-forgotten third party to a business sale, slipping into the scene like the mysterious guest at a dinner party who no one remembers inviting, but who definitely brought a very firm opinion about dessert.

Here’s the thing: landlords are rarely top of mind in a business transaction - until they are. And when they are, hoo boy, things can get interesting. Especially if you’re not prepared.

The Lease: more than just a piece of paper.

For most business owners, the lease is just background noise; a document you signed years ago, only to throw it in a file and check periodically when your rent goes up, or the annual CAM bill comes through.

But when it comes time to sell your business, that humble lease can rear its head. It’s got claws. And sometimes, it bites.

Because even though you’ve paid the rent on time for 10 straight years and always shovelled the snow from the back door (even though it wasn’t your responsibility), your buyer is a stranger. And landlords, like most animals and the Neighbourhood Watch, are naturally suspicious of strangers.

Enter: the lease negotiation.

If you’re lucky, you’ve got a lease with plenty of term left and stable rent. But that’s not always the case. No buyer is going to buy (and no bank will lend to) a business with 5-10 year debt and a 3 year lease term.

So here’s where it gets interesting. The buyer wants to step into your shoes. But your landlord? They want to try on new shoes. Preferably designer. Maybe red-soled.

They might request (demand):

• A rent increase

• A longer (or shorter) lease term

• A larger security deposit

• New clauses, caveats, or “administrative fees” that you don’t remember agreeing to…

And while these are all technically your buyer’s problem, the impact often lands squarely on your bottom line. Because if your buyer suddenly has to pay 20% more in rent, guess what? They’re likely going to renegotiate the purchase price.

Is the landlord a villain?

Not necessarily. Most landlords aren’t twirling a moustache behind a velvet curtain. They’re just protecting their investment. But the timing? Well… it can feel a bit opportunistic.

Like a kid selling Girl Guide cookies outside a Rolling Stones concert.

How to avoid getting got.

1. Read your lease.

Yes, really. From front to back (or have your lawyer do it). Know when it expires, when rent goes up, and anything related to transfer/assignment. Most leases have a transfer clause, requiring landlord consent (which cannot be unreasonably withheld). But that’s not always the case. There can be restrictions, and not all landlords have the same definition of reasonable.

2. Talk to your landlord.

No, seriously. Talk to them. Before the letter of intent is signed. Maybe even before you put the business on the market. Let them know a sale is coming and gauge their vibe. Are they supportive? Or are they smiling like a kid on Christmas morning? Better to find out sooner than later.

3. Negotiate an extension in advance.

Don’t treat the landlord like an afterthought. If possible, negotiate a lease extension upfront with plenty of term and clear rent expectations (no “market rates”). If your buyer is walking into a different lease than you had, you both need to understand the financial impact.

A few closing thoughts.

Most deals involve a landlord in some capacity. And the majority of them are pretty reasonable. In the end, they just want you to pay their mortgage.

The landlord isn’t the enemy. But they are a player, and they’r not necessarily on your side. And in a business sale, forgetting that can cost you. So bring them into the process early. Because no one likes surprise guests - especially when they show up with a shiny new lease and a pen.

Want more tips from the trenches of buying and selling businesses? Stick around. It gets better (and weirder).

Disclaimer: I am (thankfully) not a lawyer, nor am I an accountant. If any of this sounds like legal/financial advice, it's not. Take everything I say with a grain of salt. But not too much - I hear it's bad for your blood pressure.