Lease Abstract & Review

The clause that kills business sales

In Main Street transactions the lease is the single most common reason a deal falls apart late, and it is almost always one of three things: the landlord's consent to assignment is discretionary rather than reasonable, the remaining term is shorter than the buyer's loan amortization, or a recapture provision lets the landlord take the space back instead of approving the transfer.

Any of these is manageable if you find it in week one. None of them is manageable in week nine.

What the abstract gives you

Every economic term — base rent, escalations, percentage rent, CAM and tax and insurance methodology, security deposit, guaranty — on one page, with the actual dollar figures rather than the formula.

Every date that requires action, in a calendar you can work from. Option exercise windows are missed constantly, and missing one can cost more than the business earns in a year.

And a flag list, written in plain English, of the clauses that will cause a problem — ranked by how much of a problem.

For buyers in diligence

If you are underwriting an acquisition, order this before you spend money on anything else in the lease file. It is the cheapest way to find out whether the deal you are pricing is the deal you can actually get.

This is commercial real estate analysis, not legal advice. Your attorney should review the lease before you sign or assume it.