Ways around 10 year lease

June 17, 2024

by a searcher from Columbia University - Columbia Business School in Washington, DC, USA

Hi all,

I’m working on an LOI for a nice $500k SDE business but I already know the seller will sell the real estate 12-18m after close. Does this mean I can’t do SBA given 10yr lease requirement? Is there a way around that? Separately, how would you assess the risk of higher rent from a new building owner or even relocation?

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

Great question. The SBA would like a 10 year lease but it does not need to be a 10 year term. You can achieve it with options as well. Also, if the location is not essential to the business, then sometimes a long-term lease is not even required. However, even if the seller wants to sell it to you in 18 months, you still want a long-term lease in case you cannot execute on that purchase in 18 months to protect yourself, especially if the space is important to the business. I would be happy to talk through your specific situation and provide suggestions. You can reach me here or directly at redacted

Reply by a professional
from Harvard University in Lynbrook, NY 11563, USA

The fact that he's selling the property doesn't necessarily mean you can't get a 10 yr lease. Don't know if seller will agree, but you can put in whatever term you want and require that any buyer take the property subject to the lease. To be safe, you'd record a memorandum of lease in the real property records of the relevant county so a buyer is on notice and then I believe buyer would need to respect your lease (local real property law might vary, but I imagine this would work). Some states require you to record it if the lease is more than 3 years anyway.

Happy to discuss. redacted

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