Can a Landlord Sell a Property with an Active Lease?

Selling a Property with an Active Lease

In commercial real estate, one common question is whether landlords can sell their properties while they have an active lease. The answer is a resounding yes. However, the process involves certain considerations and potential challenges. We spoke with Fabian Edwards, an Office Sales & Leasing Specialist with ELIFIN®, for advice. 

Understanding the Basics

“Properties often will sell with a tenant in place and with a valid lease,” says Edwards. These properties typically trade as investments, making them attractive to buyers looking for steady income streams.

The Role of Lease Agreements

The lease agreement plays a crucial role in determining the feasibility of selling a property. Edwards points out, “It really comes down to the language that’s in the lease. The lease itself is the contract between the landlord and the tenant.” This contract governs the rights and obligations of both parties and can include provisions that impact the sale.

One provision to look for in a lease is the right of first refusal. Edwards explains, “Sometimes there are rights of first refusal in leases. This provision allows the tenant to purchase the building before anyone else if the landlord decides to sell it.” This clause can add complexity to the sale process, as the tenant must be given the opportunity to buy the property under the same terms as any other potential buyer.

Potential Hurdles in Selling with a Tenant

Selling a property with a tenant in place can present other logistical challenges. According to Edwards, “The logistics of inspecting the property once it’s under contract and doing so in a way that doesn’t disturb the tenant or their business can be tricky.” Careful coordination is helpful to ensure minimal disruption to the tenant’s operations and maintain positive relationships. 

Despite these challenges, selling a property with a tenant in place can be advantageous. These properties are often seen as investments with immediate income potential. Buyers are attracted to the stability of having a tenant already in place, which can make the property more appealing.

Steps for a Smooth Sale

To navigate the sale process smoothly, owners with current tenants in place should:

Review the Lease Agreement

Understand all provisions, especially any that relate to selling the property.

Communicate with the Tenant

Maintain open lines of communication to ensure the tenant is informed and cooperative.

Coordinate Inspections

Schedule inspections and showings at times that minimize disruption to the tenant’s business.

Work with an Agent

Working with a commercial real estate agent can streamline the steps above and handle other intricacies of selling your commercial property. As Edwards highlights, “Selling with a tenant definitely has its own little set of hurdles and things to watch out for, but with careful planning and execution, it can be done smoothly.”

Elifin Realty
No Comments

Post A Comment