Commercial real estate in South Florida is highly competitive. Sometimes you may need to compromise to secure the property you want, but what if that compromise includes inheriting tenants with your commercial property investment?
Pre-existing lease agreements can significantly impact your investment, but it’s not necessarily a negative impact. While there are benefits and drawbacks that come with any commercial investment, inheriting tenants does require careful consideration. Here’s what to know.
What Happens When You Inherit Tenants
When you purchase a commercial property with an existing lease agreement, you are stepping into the shoes of the previous landlord. This means you inherit all the rights and obligations outlined in the existing lease, including the rental income, maintenance responsibilities and other terms of the agreement.
The lease doesn’t automatically change just because the property has a new owner. You are legally bound by its terms until it expires, the tenant vacates the property or you are able to negotiate new terms. For this reason, it’s critical to fully understand the lease and how it aligns with your investment goals before finalizing the purchase.
How Existing Lease Agreements Can Benefit You
One of the biggest perks of inheriting tenants is the immediate income stream it provides. With a lease in place, you won’t need to go through the time-consuming (and sometimes costly) process of finding new tenants. The rent payments start rolling in as soon as you take ownership of the property, which can provide stability and help offset your investment costs. Existing tenants also make a favorable impression on financial institutions. A pre-existing lease agreement also offers predictability and stability in terms of rental income, lease duration and tenant obligations, all of which can make it easier to plan your finances and manage the property.
Key Considerations When Inheriting Tenants
On the flip side, there are potential drawbacks to pre-existing lease agreements. Namely, the lease offers limited flexibility and you are entering an unknown relationship with the tenant. Before signing the lease agreement, consult with an experienced real estate attorney and review the contract with a fine-tooth comb.Do your due diligence on the tenant and start planning now for how you will handle the transition when the lease ends.
Contact Us at Sirulnik Law
Before signing any commercial lease agreement, including one with an existing tenant, give us a call at the Law Offices of Alex D. Sirulnik, P.A. We will help you review and negotiate a strong and favorable lease agreement for your Florida business.
