How Leases Factor into Business Sales

By Michael D. Rubin, CEO & Founder · Updated September 2026 · 727 words

A lease can make or break a business sale, because the location is often part of what the buyer is paying for and a lender will not fund a business that may have to move. Buyers should settle the lease before they close, on terms that fit their plans, and sellers should expect the lease to be read as closely as the financials. This is general information; each side's attorney should review the actual lease.

Why the lease has to be settled before closing

For a shop, a restaurant, a clinic or any company whose customers come to it, losing the location can mean losing much of the revenue. Even a business whose customers never visit, such as a distribution warehouse or a service company with trucks, depends on a space that suits its equipment, zoning and staff.

A buyer should know before closing how long they can stay, at what cost and under what conditions. Lenders ask the same questions, and many want the remaining term, including renewal options, to cover a good part of the loan period.

What a buyer should try to negotiate

A buyer's leverage depends on the landlord's position. It is usually greater when the lease is close to expiring, when the space would be hard to re-let, or when the business is struggling and the landlord would rather keep a paying tenant. These points are worth raising.

• A term that fits your plans, with renewal options, rather than a long commitment you cannot leave
• Assignment rights, so you can sell the business later without a fight
• An exclusive-use clause that stops the landlord leasing nearby space to a direct competitor
• Rent relief or an exit right if a shopping center's anchor tenant closes
• A right of first refusal or an option to buy the property if the landlord sells
• Clear rules on repairs, insurance, property taxes and common-area charges

Know who pays when something goes wrong

A lease should state plainly who is responsible for what. Who rebuilds after a fire or storm, and does rent stop while the space is unusable? Who pays for a failed roof, a new HVAC unit or parking-lot repairs? How are increases in property taxes and insurance passed through?

In many commercial leases these costs fall on the tenant, and a buyer who assumed otherwise can watch earnings shrink after closing. Go through the lease line by line with your attorney, and fold any costs the seller has not been paying into your view of earnings.

When the landlord is the obstacle

Sometimes the landlord refuses consent, demands a large rent increase or will offer only a short term, and deals have failed for exactly this reason. The options include negotiating with the landlord through the attorneys, a price concession from the seller to offset worse lease terms, relocating the business as part of the plan if its customers would follow, or making a satisfactory lease a condition of closing. The earlier the problem surfaces, the more of these options remain open.

Sellers can reduce the risk by talking to the landlord before a buyer is found, when the advisor judges the timing right, and by extending a short lease while they still control the negotiation. A landlord who already knows the business is changing hands, and has seen the buyer's finances, is far less likely to create a late surprise.

When the seller owns the building

Many owners hold the real estate in a separate entity and lease it to their own company. In a sale, the buyer may rent the building from the former owner under a new lease at market rent, or buy the property as well. Rent that was set informally, above or below market, will be reset, and that changes the company's earnings. Our answer on whether real estate belongs in the sale price walks through both routes.

How MDR & Associates deals with leases

MDR & Associates represents sellers, and it encourages owners to resolve lease issues before a buyer is involved, because an unsettled lease is one of the easiest ways for a deal to stall late. For buyers, the firm can help arrange SBA, conventional and seller-financed structures, and a lender's lease requirements are part of that conversation. Buyers can see current opportunities on the buyer page; owners preparing to sell can contact the firm in confidence.

Where this fitsBuy a business in Texas →

Questions owners ask next

Should I buy a business if the lease has only a year left?

Only if you can secure a new lease or an extension before closing, or if the business could move without losing customers. Make a satisfactory lease a condition of the purchase and check what your lender requires. A short remaining term is also a legitimate reason to negotiate the price.

Can the landlord raise the rent when the business is sold?

Under an existing lease that is assigned, the rent normally stays as written, though the landlord may ask for more in exchange for consent. With a new lease, rent is open to negotiation. Learn the local market rent before you start, so you can judge what is reasonable.