can't sell business

[Ken21]

I own a small restaurant in a shopping center in Delaware. My landlord won't let me sell my restaurant unless I am on the lease as a guarantor for this new buyer for at least 1.5 year out of the 3 years remaining lease I have. Even though this buyer has a excellent credit rating, the landlord said he doesn't want to take any risk. He said he will come after me during this 1.5 years if the new buyer can't pay his rent. I doubt this selfish landlord will let me sell my restaurant even if I finish the remaining 3 years lease.
Am I stuck with the restaurant for life unless I agree to be a guarantor? Why should I take the risk and not the landlord?

 

[HomeGuru]

Have an attorney review your lease.

 

[LL]

Find a buyer with his own guarantee.

 

[Ken21]

reply

The lease said that"Landlord's consent shall not be unreasonably withheld on the assignment of the lease." The lawyer said it is not worth the time and effort to fight this since the buyer is only paying $22,000 for my business.
Many of the buyers I interviewed have no house or other property and business they can use as guarantee. A lot of them can only put down two or three more months of security deposits as oppose to the traditional one month. It's just too unreasonable for the landlord to request me to stay on the lease after I sell my business. Why should I take all the risk while he collect the rent? It's just like a person sell his house and pay-off the mortgage and the bank ask him to stay on for another year or so just to be sure this new buyer can make his mortgage payments.

 

[LL]

1. I agree with your lawyer.

2. You say, "It's just too unreasonable for the landlord to request me to stay on the lease after I sell my business."

I would disagree, but what do you think that a judge would say?

3. " Why should I take all the risk while he collect the rent?"
Because you are obligated for the rent for the remainder of the lease, not the landlord. You are the one asking for the lease to be assigned. Landlord has proposed a reasonable solution. I believe that you would have a difficult time showing that his approach to your problem of your wanting to leave, is not a reasonable approach.

4. " It's just like a person sell his house and pay-off the mortgage and the bank ask him to stay on for another year or so just to be sure this new buyer can make his mortgage payments."
I disagree. Its more like you, having been a good enough risk to get a mortage, selling your house and asking that the bank allow the new buyer, who isn't such a good risk, to take over your loan, and asking for some participation by you for a while to be sure this new buyer can make the mortgage payments that you promised to pay, but haven't yet paid off.

Sorry.

 

[Ken21]

reply

It's nice to talk to someone who is willing to give a detailed response even though he is also a landlord. I understand about the points about the lease and my obligation to the remainder of the lease. My main concern is even if I do finish the remainder of my lease, the landlord still won't let me sell my business unless I remain a guarantor for any buyer I found. I been with this landlord for 12 years already, and I know he will not let me go that easily. When I first signed the lease back in '89, I had no asset at all, just some savings to make the security deposit and renovate the restaurant. And now after 12 years later, he told me it is hard to find another tenant like me that will always pay their rent on time every month. He is the kind of person that will ask you to be on someone's lease or mortgage after you have fulfil your obligation, just so he as a landlord will never take any risk. His goal is unless you be a guarantor, or else you will have to close your business even if you finish you lease. It has also been either his way or the highway.
As for the mortgage stuff, it is the job of the bank to find out if a buyer is qualify for the loan or not, and if his job and down payments is enough, not the seller. I never said anything about the seller transferring his obligation to the loan to the buyer.

 

[LL]

I don't understand the part about selling the restaurant after the end of the lease. Do I understand that the new owner of the restaurant would have to also lease the property, and you are afraid that the landlord wouldn't approve any buyer?

What does the restaurant consist of, aside from the rented property? If you waited until the end of your lease, can you sell the restaurant to someone who will lease elsewhere.

 

[LL]

Re: reply

It's nice to talk to someone who is willing to give a detailed response even though he is also a landlord.

I suppose that you meant that in some complimentary way, but I am not pleased that you view my help that way.

I respond based on what I know of the law from reading the California statutes, and during 22 years of applying it in practical L/T problems which include going to court, and making application of my own intelligence to solving my own problems. I give the same advice as I would if I were a tenant (except that few good and intelligent tenants stay tenants for 22 years) and I resent the implication that my advice is any less worthy because I am a landlord.

If I were you, I would take advice from me or anyone else, based on the logic of what I say. Instead of looking to see if I am a landlord, look at what I say. If it makes sense, or if you care to look up your own laws, you can often see if I am right ot not. It's what I say that is important, not who said it.

 

[Ken21]

reply

There are 11 stores(lot) in the shopping center. I rent a empty store from the landlord 12 years ago and turn it in a small restaurant. The equipments and business belong to me, it is the store that I rent from belong to the landlord. Who ever buy my restaurant, is buying the equipment and the business. They still need to lease(rent) the store from the landlord. Is not like I pull a bum off the street and ask the landlord to assign my lease to him or ask the landlord to give him a new lease after I am finish with mine. This buyer I found has excellent credit history, checked out with the credit bureau and no criminal history. He and his wife has a saving of $80,000 but no house or other propery. The landlord thinks this is not good enough, and insist that even if I sell the restaurant after the lease period, I still have to be on it or else he would not lease the property to this buyer which makes my restaurant worthless. The thing I don't get it is why keep me even when I finish the lease? This buyer has more cash than I do, and has a better credit rating than me. He still has $58,000 to run the restaurant after giving me the $22,000 for the sale.

LL, I wanted to make it clear that I do appreciated your advice. I found it very surprising and delighted that someone would take their time and give me such vast amount of information. I certainly didn't expect it coming a landlord either. My landlord never give me reasonable explanation like you do nor does he care for that matter. Perhaps I was too into my current situation and didn't quite express myself clearly about your advice. Believe me, your advice is every bit worthy as any lawyer. Thanks!

 

[LL]

If your buyer has $ 58,000 in cash after buying your business, why don't you try to negotiate with the landlord and the buyer to tie up the cash toward securing the rent until your lease is expired? How much is the rent? How long would $58,000 last if it was used to pay the rent? Until after your lease expires?

Based on an offer like this, you may have grounds for accusing the landlord of acting unreasonably if he rejects such an offer. Similarly, if the cash was tied up to secure the rent payments, why would you be unwilling to accept the risk to guarantee the rent, with a cash guarantee like this?

As your lawyer pointed out, it doesn't seem worthwhile to go and sue the landlord for unreasonableness. Trying to reverse the positions, suppose you wrote to the landlord, outlining "an offer he can't refuse", and declaring that you will vacate the premises on some date, here is a substitute tenant, the rent is guaranteed to the expiration of your lease, there is no good reason to refuse this buyer as a substitute tenant, if he refuses him, then he is guilty of unreasonableness in violation of the lease, and inviting him to take the matter to court. Then he is the one who has to decide whether it is worthwhile to sue you over the rent for the remainder of the lease, and that there is some chance that he might lose, maybe a good chance.

This strategy has some risk, of course. I personally don't believe in bluffing, so I suggest this strategy as a committment to fight. Calculate how much rent the landlord stands to lose if you vacate and he doesn't take the replacement tenant, and then consider if it is worthwhile for the landlord to sue. Compare that with what the landlord will get in rent from the replacement tenant, especially since the rent for the remainder of the lease is guaranteed to him. How can he lose?

Remember that I don't advocate bluffing. Before beginning such a strategy, be prepared to see it all the way through.

Also, keep in good touch with the landlord, so thst once you give him notice of vacation, you can continue to negotiate with him and try to convince him that taking the replacement tenant is a wise choice.

 

[Ken21]

reply

The rent is $1718.75 per month. The buyer plan to put down 3-months of security deposits which is $5156.25. He also plan to renovate the restaurant since it is old and replace some of the worn equipments. The estimate cost of the renovation and new equipments is about $35,000 or so. That leaves the buyer about $17,843.75 left in cash for inventories, supplies, and promotions for the business. I try explaining the whole thing to the landlord that this buyer has plan to invest so much in the business that he will continue paying the rent like I have in the past. Even if he can't do so well after investing so much in the restaurant, he will then try to resale the place, he wouldn't just run off like that. It is his life saving. And if I stay on the remainder of the lease, this buyer will just rely on me to help him run the place because he know then I will be his guarantor.

Even if I can prove that this landlord is acting unreasonable, I have no money to fight him in court. He is a multi-millionaire and I'm just a person barely making a living.

I told him if I don't sell the place, I might have problem paying the rent in the future. I also said this buyer will continue paying you rent revenue which will total up to $61,875 in these three remaining years. His reply was if I even miss a month of rent payment, he will take me to court and evict me in a heartbeat. Talk about heartless, I always pay my rent on time for the past 12 years and now if I miss one month rent, he will kick me out and resale my old equipments and even sell my business to someone. I really don't know how long I can keep up the rent payment.

What is the legal proceeding in landlord evicting their tenant? Can the landlord kick a tenant out just for missing a month or two in rent, even if the tenant promise to pay him back as soon as possible? Can a tenant plead with the judge that due to financial difficulties that this is his first offense and ask to stay on? It's not like I have a habit of not paying rent. I still have all the past 12 years cancel rent checks that show I pay rent on the first of every month.

Any advice is deeply appreciated. Thank you in advance.