150K for Lease Transfer

[tvadera]

Hi All,

This is my first post in this section. I have a friend who is running a retail businesss (he is currently leasing this place and pays approx 5K rent each month), however this shop is now small for his liking and he is looking to move out and lease a bigger shop. (approx 4 times bigger than his current place)

Situation:

He has found a new shop which is 500 mts from his current shop, however the person who is running business from the bigger shop is folding it up and moving on and is willing to transfer the lease in my friends name but he needs 150K for that (as a good will and he knows my friend is doing really well , so he is trying to make most out of it). Lease at bigger shop would be approx 14K per month

My question is how can my friend get the lease in his name without paying that high 'Good Will' amount.

Can he do this:
1> Approach the landlord or REA company who is managing the place and deal with them directly.
2> Offer incentive to landlord i.e. pay 2 years of rent upfront (that way its a win win for him, landlord and nothing goes into the pocket of person who is folding up)
3> How can my friend track the landlord directly and deal with him

Any other ideas?

Thanks in advance

Regards,
TV

 

[Terry_w]

Get a copy of the lease from the land titles office and contact the landlord.

Really, he can just wait for the guy to move out. Let the landlord know he is interested in it and wait.

 

[Scott No Mates]

The tenant in the larger store is closing down, what good will has he got to sell? If you sell a business, you have an asset but if it is closing down what is he buying from the tenant? If anything he is saving the outgoing tenant $14k/month for the balance of the lease.

When does that lease expire? If there is less than a year left, there is little point in assigning the lease without getting a new lease in place.

 

[tvadera]

Get a copy of the lease from the land titles office and contact the landlord.

Really, he can just wait for the guy to move out. Let the landlord know he is interested in it and wait.

That sounds great Terry, how can he approach land titles office and on what grounds would he able to get someone else's lease? Is it a common practice to trace the landlord?

 

[tvadera]

The tenant in the larger store is closing down, what good will has he got to sell? If you sell a business, you have an asset but if it is closing down what is he buying from the tenant? If anything he is saving the outgoing tenant $14k/month for the balance of the lease.

When does that lease expire? If there is less than a year left, there is little point in assigning the lease without getting a new lease in place.

Yes I agree, he does not have any asset to sell, he just needs money for lease transfer because he knows it's a prime location and any one would be willing to get the lease..

In my friends case he knows he is doing well and hence demanding good will money for lease transfer..

The person who is closing down has 2 other businesses and has the cash flow to close the current shop n focus on his other businesses. Hence he is playing a waiting game till he finds someone who wuld pay him good will money for transfer

As far as I knw his lease expires in 2020, would confirm with my friend..

 

[Terry_w]

That sounds great Terry, how can he approach land titles office and on what grounds would he able to get someone else's lease? Is it a common practice to trace the landlord?

Just do a search, you should be able to find the home page and download the lease for a small fee.

 

[Doovalacky]

is willing to transfer the lease in my friends name but he needs 150K for that

Does he know if the landlord would even approve the lease transfer? Perhaps they won't want his type of business in the store.

The existing tenant has an obligation under the lease to stay at the property for a given period depending on the agreed conditions.
He should be paying you to take the lease assuming the landlord approves the transfer....

 

[Aaron_C]

In business, if you have no lease, you have no goodwill. So it is a rip off.

 

[Truly Exotic]

thats just a silly idea,

you shouldnt pay him a cent unless its the only one availble for lease and will be for the next 2000 years,

no good will in his business if he is doing so badly,, thats just proof that his good will=zero
just wait until he moves out, and get the damn thing for free,

offer to take over his lease for free and as soon as possible,

failing that, approach the landlord and tell them you are interested, they may give you number 1 priority if you have been paying rent on time

 

[Scott No Mates]

If you pull a copy of the lease then there may be a requirement to trade from the premises ie not be closed. Nontrading may be a breach.

 

[Macca]

I have heard of this happening for prominent sites before, I recall it being referred to as "key money".

It is up to you to decide how good the site is and how much it would improve your bottom line if you moved there.

You would need to lock in the options to remain long term before considering paying for the "key"

 

[Aaron_C]

Macca - that does happen in prime sites like you have described. However, it only happens if the exiting tenant has a LEASE, with options. Otherwise you are paying goodwill+stock for a lease that will expire in say 2 years? You're an idiot if you did that.