Comments on: When the lease outlives the business http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/ Editors from FSB magazine answer your pressing small-business questions. Tue, 15 Dec 2009 12:52:55 +0000 http://wordpress.com/ hourly 1 By: Tomislav,Zadar,Croatia http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1767 Tomislav,Zadar,Croatia Mon, 18 May 2009 10:56:48 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1767 I`m only 16,but I`ve looked my father how is he fighting to repay his motgage in any of possible ways he can.So,I wanna tell you that you should sacrifice yourself as long as you can,but if you cannot,I suggest you to sell all your property,then buy yourself a new low priced house,repay all credits or mortgages you may have and open a new small-size business when from you are going to earn and segregate some money for crisis like this. I`m only 16,but I`ve looked my father how is he fighting to repay his motgage in any of possible ways he can.So,I wanna tell you that you should sacrifice yourself as long as you can,but if you cannot,I suggest you to sell all your property,then buy yourself a new low priced house,repay all credits or mortgages you may have and open a new small-size business when from you are going to earn and segregate some money for crisis like this.

]]> By: CPA, DC http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1413 CPA, DC Sun, 11 Jan 2009 04:52:56 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1413 I have to disagree with the following. "A guaranty is virtually impossible to enforce" I hear you on the premise of being in the business for 50 years. However if the lease is written correctly saying a guaranty is not enforceable is like saying co-signing on a car note is not either. Now a few of the following exceptions could occur: 1) Termination right is in the lease 2) Economic termination is possibly included 3) Buyout is in the lease 4) Possibly sublease the space (right probably exists) However one way to likely get out of a guaranty is likely bankruptcy on the personal side. As far as retail lessor working with the tenant I totally agree, the last thing they want to do is bring lawyers into the game, incur additional expenses, etc.......Thus they were probably more likely to let you out of a lease especially if they could find another tenant.....however the events of the past year plus almost certainly change everything. I have to disagree with the following.

"A guaranty is virtually impossible to enforce"

I hear you on the premise of being in the business for 50 years. However if the lease is written correctly saying a guaranty is not enforceable is like saying co-signing on a car note is not either.

Now a few of the following exceptions could occur:

1) Termination right is in the lease
2) Economic termination is possibly included
3) Buyout is in the lease
4) Possibly sublease the space (right probably exists)

However one way to likely get out of a guaranty is likely bankruptcy on the personal side.

As far as retail lessor working with the tenant I totally agree, the last thing they want to do is bring lawyers into the game, incur additional expenses, etc…….Thus they were probably more likely to let you out of a lease especially if they could find another tenant…..however the events of the past year plus almost certainly change everything.

]]> By: W. G. WELLS, SANTA MONICA,CA http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1412 W. G. WELLS, SANTA MONICA,CA Sat, 10 Jan 2009 02:19:11 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1412 A guaranty is virtually impossible to enforce because of numerous legal requirements which can be found in yourlaw library or a commercial attorney. By all means talk to your lessor who knows you and he made a dumb deal and lay your cards on the table but avoid taking an attorney who will only inflame the relationship with the lessor. I know from 50 years experience as a lessor. A guaranty is virtually impossible to enforce because of numerous legal requirements which can be found in yourlaw library or a commercial attorney. By all means talk to your lessor who knows you and he made a dumb deal and lay your cards on the table but avoid taking an attorney who will only inflame the relationship with the lessor. I know from 50 years experience as a lessor.

]]> By: Anonymous http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1411 Anonymous Sat, 10 Jan 2009 00:06:58 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1411 In my experience; (if the business fails and there is a personal guarantee) the landlord will market the property once you leave it. If and when he locates a new tenant, he now has a damages amount that was personally guaranteed. If this amount cannot be negotiated then he is entitled to all legal remedies...like a judgement against you personally. In my experience; (if the business fails and there is a personal guarantee) the landlord will market the property once you leave it. If and when he locates a new tenant, he now has a damages amount that was personally guaranteed. If this amount cannot be negotiated then he is entitled to all legal remedies…like a judgement against you personally.

]]> By: Chris http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1410 Chris Fri, 09 Jan 2009 23:34:27 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1410 When a tenant jumps his lease in Canada the landlord receives two months rent and nothing more. Do you have anything like this in the States? When a tenant jumps his lease in Canada the landlord receives two months rent and nothing more. Do you have anything like this in the States?

]]> By: Paul William, Tulsa, OK http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1405 Paul William, Tulsa, OK Fri, 09 Jan 2009 18:15:48 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1405 Paul Tomas says no commercial landlord gives a one year lease and it would be suicide for the landlord...well,,,they do and can if they want to...and in a bad market rent for a year is better than no rent at all as long as the landlord does not sink finish out money in it...and a landlord WILL do a one year lease or what they say as keeping tenants on short fuses,,,if they have other ideas for the property or that space in 2 or 3 years so they can avoid the hassle and expense of buying out the lease to do what they want to do....so yes,,,,there are cases where a one year lease is done,,and its not super rare these days. Paul Tomas says no commercial landlord gives a one year lease and it would be suicide for the landlord…well,,,they do and can if they want to…and in a bad market rent for a year is better than no rent at all as long as the landlord does not sink finish out money in it…and a landlord WILL do a one year lease or what they say as keeping tenants on short fuses,,,if they have other ideas for the property or that space in 2 or 3 years so they can avoid the hassle and expense of buying out the lease to do what they want to do….so yes,,,,there are cases where a one year lease is done,,and its not super rare these days.

]]> By: Virginia, Bossier City, LA http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1398 Virginia, Bossier City, LA Thu, 08 Jan 2009 14:30:04 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1398 Actually, last year I negotiated a 1-year commercial lease, with a 6-month default clause. And if they had to put a lot into build outs, they should have negotiated more breathing room into the lease. Everything on a commercial lease is negotiable, and should be negotiated. But the time to do that is before the company fails! But, really, many landlords will let you out of a space if you can find a tenant to take over your lease. They don't want a court fight, either. Especially a publized one. Actually, last year I negotiated a 1-year commercial lease, with a 6-month default clause. And if they had to put a lot into build outs, they should have negotiated more breathing room into the lease. Everything on a commercial lease is negotiable, and should be negotiated. But the time to do that is before the company fails! But, really, many landlords will let you out of a space if you can find a tenant to take over your lease. They don't want a court fight, either. Especially a publized one.

]]> By: Travis, Maryland http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1396 Travis, Maryland Wed, 07 Jan 2009 22:13:14 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1396 Chances are a guarantee was signed. LLC's are probably the least respected of corporate strcutures (partly because they are so simple and inexpensive to form, and thus easier to walk away from) and thus landlords, finance, and mortgage companies generally want more to go after then some LLC (likely no liquid assets) you formed for the sole purpose of running a particular business. Chances are a guarantee was signed. LLC's are probably the least respected of corporate strcutures (partly because they are so simple and inexpensive to form, and thus easier to walk away from) and thus landlords, finance, and mortgage companies generally want more to go after then some LLC (likely no liquid assets) you formed for the sole purpose of running a particular business.

]]> By: Paul Tomas Media, PA http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1395 Paul Tomas Media, PA Wed, 07 Jan 2009 22:05:31 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1395 No commercial landlord gives 1 year leases to small spaces like a yogurt shop. Maybe a 3 year deal if you are lucky, most likely 5 years. In all my years in commercial real estate, I have never seen a 1 year commercial lease. That would be suicide for a commercial landlord. No commercial landlord gives 1 year leases to small spaces like a yogurt shop. Maybe a 3 year deal if you are lucky, most likely 5 years. In all my years in commercial real estate, I have never seen a 1 year commercial lease. That would be suicide for a commercial landlord.

]]> By: Jim (has a business of 30+ years), Denver, CO http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1394 Jim (has a business of 30+ years), Denver, CO Wed, 07 Jan 2009 19:34:54 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1394 Some lessons learned: 1) Don't sign a long (5 yr) lease on a brand new, untried business. You can usually get a 1 year with up to 4 option years. 2) The most expensive space is in a new developement because the first tenant has to "build out" the interior, which as you found is a really expensive, delays your opening, and probably not recoverable at the end of the lease. Some lessons learned:
1) Don't sign a long (5 yr) lease on a brand new, untried business. You can usually get a 1 year with up to 4 option years.
2) The most expensive space is in a new developement because the first tenant has to "build out" the interior, which as you found is a really expensive, delays your opening, and probably not recoverable at the end of the lease.

]]> By: Jon King West Chester, PA. http://smallbusiness.blogs.cnnmoney.cnn.com/2009/01/06/when-the-lease-outlives-the-business/#comment-1392 Jon King West Chester, PA. Wed, 07 Jan 2009 18:32:15 +0000 http://askfsb.blogs.fsb.cnn.com/?p=865#comment-1392 Obviously the LLC has no assets for the landlord to go after. Any decent attorney can easily help them declare the LLC bankrupt. If the business has failed, move on. Do not keep throwing good money after bad. The landlord will not bother chasing them as they have few assets and the court will not pierce the veil without massive evidence of fraud. The $107,000 in improvements are a loss. Maybe the landlord get get some value but chances are the next tenant will need their own build out anyway. Obviously the LLC has no assets for the landlord to go after. Any decent attorney can easily help them declare the LLC bankrupt. If the business has failed, move on. Do not keep throwing good money after bad. The landlord will not bother chasing them as they have few assets and the court will not pierce the veil without massive evidence of fraud. The $107,000 in improvements are a loss. Maybe the landlord get get some value but chances are the next tenant will need their own build out anyway.

]]>