Tenants, Landlords, and Owning Your Own Shop

      When the landlord puts a "for sale" sign on a cabinetmaker's rented shop building, the tenant starts to consider his choices. Here, shop owners explain why they think buying out your landlord can be a wise investment. May 22, 2007

Question
Our landlord is selling our building. She put a large "For Sale" sign on the front of it. It is been there for almost two years now. As a result some customers believe that we are going out of business. Our landlord refuses to remove the sign. Is there anything legal can be done to take sign down? If not, any ideas how to overcome the power of that sign?

Forum Responses
(Business and Management Forum)
From contributor R:
It is obvious what her intentions are. If she manages the sale, will you still have a building to work out of? Or will you be caught off guard and have to move your operation? I would be looking for a place to move into. Two years and no buyers, the price must be too high. How’s the rent price? In my opinion I would be ready to move.



From contributor H:
I would suggest that you make them an offer to buy the building.


From contributor T:
How long is your lease? What are the terms of sale to a new owner? Buy it if you can, after two years the owner is asking probably too much. With the bubble in prices bursting who knows? What’s the reason for the sale - renegotiate the lease with an option to buy? A portion of the rent towards a down payment works out better tax wise sometimes for the owner.

The last building we were in sold for 400K. We were offered to buy it but we were stupid. The new owner gave us 90 days to vacate even though we had a year on our lease - he was going to put a new roof on the building (it did need one) and leave us without a roof for three months. It actually would have been two weeks if we had bought it. Now with a new roof and repaved parking lot three years later it's listed for 1.1 million!

If you are embedded in your building like I was after nice years -five guys in 5,000 sq ft - it cost me more to move than the down payment I would have made. If I had I would have made more on the property than in the shop these last couple of years.



From contributor D:
Buy it! As Contributor T said, it will never cost less than it does today. If you are unsure, find a local commercial realtor, buy him/her lunch and a few drinks and find out the things you need to know before you sign papers. Even if you set up with a broker, the fees, at 4% are reasonable to avoid pitfalls (Environmental surveys, contracts that don't protect you, etc). It is a lot like buying a house, legal-wise, and equity-wise.

You are threatened with losing your place of business. If you think the "For Sale" sign puts off customers, try a sudden, unplanned move and see how that affects them. I also laughed at buying a scrubby pole barn for what I thought was too much money. Truth is, the payments would be about the same as my rent, and I'd nearly own the darn thing by now, and have all that equity to expand with. I'm not laughing now.



From contributor O:
The best you can do is to have them post a sign that says "Building for sale" in big letters. Then people shouldn't mistake it to mean your business.


From the original questioner:
Thanks to everyone for your opinions. A little more light on our situation: The landlord is selling 3 buildings as a package and our building as part of it. The sign is on our building because it has the most value and exposure to walking crowd. She wants 1.6 M for everything. The sign has the words "3 buildings total", and below "For Sale" in smaller font.


From contributor L:
Before I bought this building I had leased space with a year lease, then it was on a month by month extension. One day after three years the landlord walked in and gave me 30 days notice. In that time I couldn't find a space I could afford. I moved my tools into storage and went to work for someone else for two years. I ended up building on a site that allowed me to add on later and that saved another costly move.


From contributor J:
I like most people's "just buy the building yourself" answer. Did you ever stop to smell the roses and think, gee if this guy could afford to buy the building he would? For the rest of you out there who are not as financially fortunate as the respondents to this thread, most banks will require a minimum down payment of at least 25%. I don't know about you, but I sure don't have a couple hundred grand lying around to spare.


From contributor A:
I can't help but notice that part of the discussion above illustrates one of the big differences between those of us that own a "business" and those that own a "job." The purpose of a business to a businessperson is to generate income to increase assets. Buy equipment and real estate and retirement plans. If it is a "job" that you own, cash is usually tight, hand to mouth, looking out 30 days or so, no plans for the future other that "stay in business." They both may look the same to the casual observer or one man shop growing into a 2-3 man shop. But the difference is huge, especially long term. Another reason to own real estate is for retirement. You can sell the business, or hold onto the real estate and lease it out to your former shop or for other uses. It will pay your way into retirement.


From contributor C:
To answer your question, I would have your landlord put on the sign "real estate only". If they won't do that, then I would have your own sign posted (in accordance with your lease) saying something to the effect that real estate only for sale, not the business. You could perhaps insist that the landlord is violating the "quiet enjoyment" clause of your lease by the sign if you have one, but beware. If you insist upon strict performance be certain they will too as well.

I bought two industrial buildings five years ago. One is 30,000 feet which I rent out at $7500/mo, and my shop is 10,000 sq. ft. The rental income for the large building provides me a net of $1500/mo after all expenses (taxes, insurance etc). On top of that my shop is free, and my company leases it from myself personally. Rental income is not subject to FICA taxes.

I have a free shop, am making $1500/mo, and have a nice portion of my take home not subject to FICA taxes since it is rental income. Every year my buildings appreciate too. Banks will take a quality tenant into consideration. My down payment was 10%. My business is strong, any my tenant is a publicly traded company with a 15 year lease. I too in the past have had landlord issues with expired leases and having to pay 10's of thousands to move.



From contributor S:
On a more practical level other than buying the building, check your lease. I rent out my former building as I have retired, and the lease spells out when, where, how big and for what time period I can post signs for rent, lease or sale. If your lease contains such language, you may have cause to confront the owner over losses to your business, although proving that a decline in business is due to the sign she placed may be difficult.



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