Leasing vs Owning Your Location: How It Affects Your Business Sale

Short answer: If you lease, your landlord’s consent to assign the lease, enough remaining term for the buyer’s lender, and your personal guarantee decide how smoothly the sale closes. If you own the building, you can sell it with the business, keep it and lease it to the buyer, or sell it separately to an investor, and either way the business is valued on its earnings after a fair market rent. Owning gives you more choices and more moving parts; leasing keeps the deal simpler but puts part of it in your landlord’s hands.

Whether you lease or own your space changes what a buyer is getting, how the purchase is financed, what you walk away with, and sometimes whether the sale closes at all. I’m Ryan C. Winter, Business Broker with Truforte Business Group, based in St. Augustine and working with owners across Florida. Here is how the two compare.

Leasing vs owning: How does each change your sale?

Factor	Leased location	Owned location
What the buyer gets	The business plus the right to stay in your space	The business, plus the building if you sell both
Who has to agree	You, the buyer, and your landlord	You and the buyer, plus any mortgage lender on the property
How the business is valued	On earnings after the rent you actually pay	On earnings after a fair market rent, with the building valued separately
Buyer’s financing	The business price only	Larger if the building is included, smaller if you keep it and lease it
Your income after closing	The sale proceeds	The sale proceeds, plus rent if you keep the building
Your risk after closing	A personal guarantee on the lease, unless you are released	As landlord, your rent depends on the buyer running the business well

What are your options if you own the building?

Most owners end up on one of three paths. My guide to selling a business that includes real estate goes deeper on pricing each piece.

Sell the business and the building together

One buyer takes both, and you have no landlord role afterward. It is the cleanest exit. The trade-offs: a larger price narrows the group of buyers who can afford it, a lender financing the property will usually want an appraisal and some environmental review, and the closing adds title work, a survey, and a deed. In Florida, a deed also carries documentary stamp tax under section 201.02, Florida Statutes, so ask your attorney how the contract will handle it.

Keep the building and lease it to the buyer

You sell the business, keep the real estate, and sign a new lease with the buyer. You keep an asset and a stream of rent, and the buyer finances less, which can widen your pool of buyers. The honest drawback: your rent now depends on how well someone else runs the business you sold. Write the lease the way any careful landlord would: a fair market rent, a personal guarantee and security deposit, clear repair duties, and enough term and renewal options for the buyer’s lender. Some owners add an option for the buyer to purchase the building later.

Sell the business and the building to different buyers

You sell the business to an operator and the building to an investor who becomes the landlord, with a lease to the business buyer in place. It suits an owner who wants a full exit when the buyer will not buy the property. It takes coordination, because the investor will want to approve the tenant and the lease, and the business buyer needs a signed lease on day one.

Why does market rent matter when you own?

Many owners who hold their building pay themselves little or no rent, or pay above market rent to move money into a separate property company. Either way, the earnings do not show what a buyer will pay to occupy the space. When I recast your financials, I substitute a fair market rent: if you have paid too little, earnings go down, and if you have paid too much, the excess is added back. Showing it up front protects your credibility. My guide to seller’s discretionary earnings explains recast earnings.

If you keep the building, rent and price pull against each other: a higher rent leaves the buyer lower earnings, which usually means a lower price for the business. Also check where the building is titled. If it sits inside your operating company, a stock sale would carry it along unless it is moved out first, a question for your attorney and CPA before you list.

What do buyers and lenders look for in a lease?

If you lease, the lease is part of what you are selling. My guide to lease assignments in a Florida business sale covers the consent process. These terms matter most:

• Remaining term and renewal options. Lenders compare the term left, counting renewal options the tenant controls, with the length of the loan. A short lease can block financing even with a willing buyer.
• The assignment clause. Most commercial leases need the landlord’s written consent to assign. Whether the landlord must be reasonable or can refuse for any reason changes your leverage.
• Change of ownership language. Some leases treat a sale of the company’s stock or membership interests as an assignment, so a stock sale can still need consent.
• Personal guarantees. An assignment does not always release you from a guarantee you signed. The landlord will usually want one from the buyer, and you should ask for your own release as part of the deal.
• Rent level. Rent below market adds value if the landlord cannot reset it on assignment. Rent above market lowers earnings and the price a buyer can pay.
• Use, exclusivity, and early termination. A narrow permitted use limits a buyer’s plans, an exclusive protects against a competing tenant, and any landlord right to relocate or end the lease early is a risk buyers price in.

Many buyers use bank financing, often an SBA-guaranteed loan, and the lender reads the lease too. Buyers and lenders often ask the landlord to confirm in writing that the lease is in good standing (an estoppel certificate), and lenders may ask for a landlord’s waiver covering their rights in the equipment. Because a slow landlord can delay closing, the purchase agreement with contingencies (some deals start with a letter of intent) usually makes landlord consent a condition of closing. More in my post on how SBA loans affect a business sale.

Source: U.S. Small Business Administration, including its 7(a) loan program page and its SOP 50 10 lending rules. SBA rules change, so verify current requirements with the SBA or an SBA lender before relying on them.

My standing advice for tenants: read the lease with your attorney before listing, and bring the landlord in once a qualified buyer is in hand.

Common mistakes owners make with their location

• Lumping the business and the building into one asking price.
• Leaving below-market rent, or no rent, in the financials for a buyer to find in due diligence.
• Letting the lease run short, or ignoring it until a buyer is ready to close.
• Assuming an assignment ends your personal guarantee.
• Writing a lease-back the buyer’s lender will not accept, or setting rent so high it undercuts the business price.
• Telling the landlord about the sale before you know what the lease allows.

To check how ready your business is to sell, location included, take my sale readiness quiz.

What should you ask your attorney and CPA?

Neither path is right for everyone; the answer turns on your lease, your taxes, and your plans after the sale. For your attorney:

• Does my lease allow assignment, what consent standard applies, and does a change of ownership count as an assignment?
• Am I personally guaranteeing the lease, and how can I ask for a release?
• If I keep the building, what should a new lease with the buyer include?
• Is the building titled in my operating company, and should that change before a sale?

For your CPA:

• After taxes, how does selling the building compare with keeping it and collecting rent?
• How should the price be allocated among the building, equipment, and goodwill? In an asset sale, buyer and seller generally report that allocation on IRS Form 8594.
• Could a like-kind exchange apply to the building? The IRS limits section 1031 exchanges to real property, so it would not cover the business itself. My 1031 exchange guide explains how owners separate the two.
• What fair market rent should my recast financials use?

Related guides: what happens to business leases when you sell in Florida, what happens during due diligence, and how to sell a business in Florida.

Frequently asked questions

Is a business worth more if it owns its building?

The total deal is bigger, but the business itself is not worth more just because you own the real estate. Buyers value the business on its earnings after a fair market rent and value the building separately. Owning does give you more ways to structure the sale.

Can I sell my business and keep the building?

Yes. You sell the business, keep the real estate, and sign a new lease with the buyer at a fair market rent, with a personal guarantee, a security deposit, and enough term for the buyer’s lender. Your rent then depends on how well the new owner runs the business.

Do I need my landlord’s permission to sell my business?

Usually, if the buyer takes over your lease: most commercial leases require the landlord’s written consent to assign, and some treat a stock sale as an assignment. The alternative, a new lease between the landlord and the buyer, also needs the landlord. Read the lease with your attorney before listing.

What if my lease is close to expiring?

A short lease can stall a buyer’s financing. Ask your landlord for a renewal or extension before you list, framed as a renewal rather than a sale. If that is not possible, the buyer may negotiate a new lease directly with the landlord as part of the deal.

Will I still be liable on my lease after I sell?

Possibly. Assigning a lease does not always release the original tenant or guarantor, so you could stay on the hook if the new owner stops paying. Ask for a written release as part of the assignment, while the landlord still wants the deal to close.

To talk through your own lease or building, you can reach me here. To find out what your business could sell for, request a free, confidential business valuation or call me at (904) 789-1276 (Truforte Business Group).

• Category: Northeast Florida, Selling a Business