Today’s SMB Manual looks at your commercial lease through a buyer’s lens, explains how its terms can delay a sale, and outlines what to negotiate when you sign, renew, or prepare to sell.

Eight years ago, you signed the lease to open your business. Your attorney reviewed the rent, the term, and the renewal options in the landlord’s 38-page form. Now a buyer has signed a $1.2 million letter of intent, and the buyer’s lender wants a copy. Section 14 lets the landlord approve or reject a lease transfer at its sole discretion, including one triggered by a sale of more than half the company. The deal therefore requires the landlord’s consent before closing.

The assignment clause determines whether a buyer can take over your lease when purchasing the business. In an asset sale, the buyer purchases the equipment, contracts, and other assets, and the lease must be transferred to the buyer’s company. In a stock sale, the buyer purchases your shares, so the existing company remains the tenant. Even then, the lease may require the landlord’s approval if it treats a change in ownership as an assignment.

State law sets the rules that apply when the lease leaves an issue open, but the terms you sign can change those rules. Under California’s Civil Code, for example, a lease can prohibit transfers or set conditions for approval, including giving the landlord a share of payments the tenant receives above the rent. If the lease requires approval without stating when it can be refused, the landlord cannot unreasonably withhold consent. The wording therefore determines how much control the landlord has when you decide to sell.

When you review a lease as a new tenant, the cost of occupying the space takes priority over what happens when you sell. Years later, the buyer needs the lease, the lender needs certainty, and closing depends on securing the landlord’s consent. Depending on the lease and applicable law, that consent may come with higher rent, a larger deposit, a review fee, or a personal guarantee from the buyer. The landlord may also have the right to reclaim the premises. Even if the transfer goes ahead, your existing guarantee may remain in force, leaving you liable if the buyer stops paying.

Suppose the landlord agrees to the transfer only if monthly rent rises from $8,000 to $10,000. That increase takes $24,000 a year out of the cash flow the buyer used to calculate the offer. At the 2.7x average cash flow multiple in BizBuySell’s second-quarter report, the lower cash flow would reduce the business’s value by $64,800.

Negotiate the assignment clause when you sign or renew the lease. Ask for terms that prevent the landlord from unreasonably withholding, conditioning, or delaying consent, and require the landlord to respond within 15 business days. Agree on the financial strength or operating experience a buyer must demonstrate to qualify for a transfer. A qualifying sale should give the landlord no right to reclaim the premises or collect a share of the sale proceeds. The agreement should expressly release you and any guarantor when the approved buyer takes over the lease. Renewal options should also provide enough time for a buyer to obtain financing and repay the loan.

About twelve months before you plan to sell, review the lease with the transaction in mind. Request an estoppel certificate signed by the landlord confirming the rent, remaining lease term, and any defaults. Discuss the proposed sale and the consent requirements before a buyer signs a letter of intent. Knowing those requirements early gives you time to resolve conditions that could reduce the agreed price or push back the closing date.

After eight years of building a business, selling it may still require your landlord’s consent. The lease terms can affect your net proceeds from the sale and whether you remain liable after the buyer takes over. Review those terms before agreeing to a sale.