Commercial real estate lease agreements in Miami come in all shapes and sizes, including those with a pre-existing lease agreement. In transactions like these, the buyer is acquiring more than just the brick-and-mortar, they’re also stepping into a landlord-tenant relationship that’s already in motion. While this setup can offer plenty of perks, it’s not without its challenges. Here’s a closer look at some of the pros and cons of inheriting a pre-existing lease agreement.

Benefits of Pre-Existing Lease Agreements
  • Immediate cash flow – One of the most attractive aspects of a pre-existing lease agreement is the immediate rental income it provides. With tenants already occupying the property, you start receiving rent payments as soon as you take ownership. This can be a huge advantage for investors looking to minimize downtime and begin earning a return on their investment right away. Not surprisingly, financial institutions also have a greater preference for lending to investors who purchase leased spaces rather than empty ones.
  • Reduced tenant search costs – Along the same vein, a pre-existing lease saves you from the hassle, expense and effort that comes with filling a vacant property. 
  • Stability and predictability – A long-term lease agreement with a reliable tenant offers stability and predictability. You can project rental income for the duration of the lease, and this also makes it easier to budget and plan for ownership expenses like taxes, maintenance and insurance.
Drawbacks of Pre-Existing Lease Agreements
  • Limited flexibility – The biggest downside of inheriting a pre-existing lease is the lack of flexibility. You’re bound by the terms of the lease agreement even if they don’t align with your vision for the property.
  • Tenant issues – Not all tenants are created equally. Some might have a history of late payments, excessive wear and tear on the property or failure to comply with lease terms. As the new owner, you inherit the responsibility of dealing with these potential issues.
  • Unfavorable lease terms – In some cases, the existing lease agreement may include unfavorable terms, such as long lease durations, limited rent escalation clauses or unclear maintenance responsibilities.
  • Complications with future plans – If you’re purchasing the property with a specific vision in mind such as redeveloping or repurposing it, a pre-existing lease may create roadblocks. You may need to wait until the lease term ends or negotiate with the tenant to terminate the lease early, all of which could be costly or time-consuming.

Moreover, any lease is going to carry risk. Pre-existing lease agreements may come with more ambiguity. Be sure to have an experienced real estate attorney review the commercial lease agreement and negotiate on your behalf. As you consider commercial real estate opportunities in Florida, get in touch with our experienced attorneys at the Law Offices of Alex D. Sirulnik, P.A. We will help you evaluate any existing lease agreement and develop a strategy to find the ideal resolution. Contact us today to request a free consultation.