Handling Seller Liability on Lease Assignment in SBA Acquisition

October 18, 2025

by a searcher from Dartmouth College - Tuck School of Business at Dartmouth in Bellevue, WA, USA

I’m in the final stage of an acquisition and running into a tricky lease issue. The landlord is requiring that the seller remain jointly liable on the lease after assignment (a total of 2 1/2 years). I’ll be assuming the lease at close. The landlord does not appear to be willing to negotiate. We’ve discussed things like: -A time-limited joint liability period (e.g., 6–12 months) -An indemnity agreement from me to the seller covering any post-closing rent or damages -Possibly a rent escrow or reserve for extra protection Has anyone navigated this type of seller joint-liability concern before? What practical solutions did you use that both (1) satisfied the landlord and (2) gave the seller peace of mind without violating SBA rules? Would appreciate any firsthand experiences or examples of what worked for you.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Sorry to hear you are in this position. I have had this come up on one transaction in the past. It is a tricky situation. The biggest issue is the SBA does not like escrows and as a rule they typically will not allow an escrow to go beyond one year. So it is going to be really hard to escrow for this issue. However, you could do a one-year escrow to solve part of the concern and provide the seller some relief. At that point they would only have 18-months of exposure still to contend with. You could then try to use an indemnity agreement beyond that. The other option is to negotiate the seller down to a shorter term or offer a large deposit at closing for rent. That could be an issue with your financing however, but it may be another way to handle it. I hope this helps. I wish there was an easy solution. In the last deal we had this issue come up the buyer threatened to move the business and eventually got the seller to agree to a shorter indemnity period with the seller agreed to. Good luck.

Reply by an intermediary
from University of Nevada in Henderson, NV, USA

I agree with you having to work through this with the seller. Offering them a high sell price, giving them some collateral in something possibly, but most importantly sharing with them that if we dont do this I can't close the deal. If you need more help with this, then this is something my team can help with. Just DM me and reference the post

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