Real Estate in Business Sale

Nashua business owner has questions and concerns about real estate in his business sale

Owning and controlling real estate can be viewed as favorable in a business sale, but how it has been handled by the seller can either make or break a deal.  Owning real estate can provide the seller with options such as using it to help finance part of the deal and offering flexibility on how it is treated or transferring wealth with advance planning.  However, real estate can be viewed as a liability if it is not being properly managed.

Here are some key real estate planning considerations to contemplate for future business transactions.

Understand the value of your real estate. 

Know the value of your real estate and the market lease rates.  Consider conducting a real estate valuation every few years to help understand the value.

Separate real estate from your business entity. 

Hold real estate on its own in a separate entity, not in the operating business.  This creates increased asset protection and transaction flexibility.

Maintain proper documentation. 

Have all environmental studies, appraisals and other documents readily available to avoid delays if this information is requested.

Incorporate key lease or purchase considerations in your letter of intent (LOI). 

Many business owners fail to address this issue in the LOI phase, but it is crucial as sellers have the most leverage before an LOI is signed.

Understand your lease terms and assignment provisions. 

If you lease property be sure to understand the assignment provisions.  Can the lease be assigned upon sale of the business?  Under what circumstances is owner consent required?  Upon sale of the business and assignment of the lease, is the tenant still on the hook for rent if the buyer defaults or are there sunset provisions in the lease?  Negotiating your lease exit strategy beforehand is invaluable when you are trying to sell your business.

Disclose ownership issues. 

Have clearly defined ownership and that there is common ownership with the operating company unless there is an estate planning strategy in place, and that all transfers are fully documented (even with family).

For more information on real estate, business transactions or general business planning and purchase and sale matters please contact the attorneys at Welts, White & Fontaine PC.  Please contact us by clicking here or by calling (603) 883-0797. Welts, White & Fontaine is one of Nashua’s largest, multi-practice law firms and serves the legal needs of both individuals and businesses in towns such as Amherst, Milford, Hudson, Brookline, Windham, Hollis, Merrimack, Litchfield, Bedford, Londonderry, Pelham, and, of course, Nashua.

Author: John S. Polgrean, Esq.

This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal opinion.