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How can I protect myself from the real estate of a business getting sold soon after business purchase?

I'm looking at the purchase of a retail business. The owner of the business also owns the real estate. I have been told that the owner may sell the real estate soon after the business is sold.

A big factor in the sale is the cost of the lease. This business could not be easily moved. Is there any way to protect myself from 1) the real estate being sold and the lease increasing significantly, and worse 2) the real estate being sold and the new owner wanting to put the property to a different use?

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Answers (6)
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We are financial consultants to a group of investors whom we have their consent to manage their funds which is in our custody for cooperation in joint venture business investments.

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Jul 5, 2017
Steven St
World Business Partners, Inc
Los Angeles County, CA

You always need a very good attorney who specializes in real estate and/business law to draft the contracts. Even half bad attorneys will protect you from this but I would pay for the best legal person you can afford because what they cost you up front will save you down the road for years to come. One thing about Contracts to Sale, and that is you usually only get one really good chance to get what you want and that's in the very beginning. After the contract is signed it's too late or will cost too much to change when things go wrong. Do it right the first time and save yourself the trouble.

Hope this helps.

Apr 25, 2009
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The BAF Group LLC
MD

Good luck. Glad I could offer something useful!

Apr 7, 2009
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Los Angeles County, CA

Thank you Don for providing me with some great direction. - R

Apr 7, 2009
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The BAF Group LLC
MD

You should be able to protect yourself through a combination of clauses inserted into the Contract of Sale and the Lease, both of which should be reviewed and negotiated by your own attorney. Putting in a demand for any eventual sale to include a Deed Restriction protecting you perhaps, and wording that stipulates in the Lease and any options to renew will survive any sale of the Real Estate makes your tenancy a consideration in the property sale. I do not know California Real Estate Law, but I would think this is rather easily done. If your Seller balks, there is a problem; I would not buy without these being in your favor, if you truly cannot easily move the business. But I would also put in a "first right of refusal" clause into both agreements, and/or some other terms that give you the first shot at purchasing the property, if and when he decides to sell. And if you think you have the financial capability to buy now, make him an offer. Depending upon the size of the business and the terms of the Lease, you may find that the better amortization that can be obtained by doing this would make your payments to the Bank lower than payments separately for the business Loan, plus Rent. Moreover, the Bank may be much easier to deal with and the loan easier to get, if the tangible asset of the property is included. Good luck!

Apr 7, 2009
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Los Angeles County, CA

Still wondering if anyone has any opinions about this. The broker representing the seller simply says that the current owner is of yet unsure and that he is still entertaining the idea of selling the property, but it is not certain.

Apr 6, 2009

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