Purchasing subject to negotiating a new lease

Discussion in 'Commercial Property' started by kmrr, 17th Jun, 2021.

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  1. kmrr

    kmrr Well-Known Member

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    Let's assume we find a property but the tenant is only on a month to month lease or has a lease expiring in a short period of time. This is obviously undesirable as we would like something stable.

    What is the best way to buy subject to a new lease being signed? Has anyone gone through this process before and what were your experiences negotiating with both the vendor and tenant?
     
    kmrr, 17th Jun, 2021
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  2. The Y-man

    The Y-man Moderator Staff Member

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    It's a double edged sword - you might sign on a second-rate tenant for a long lease!

    The Y-man
     
    The Y-man, 17th Jun, 2021
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  3. Scott No Mates

    Scott No Mates Well-Known Member

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    The likelihood is that the tenant will bail - the only saving grace is that the property may be considered a 'going concern' for GST purposes.
     
    Scott No Mates, 17th Jun, 2021
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  4. kmrr

    kmrr Well-Known Member

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    presumably we're not trying to sign an unattractive tenant on then! I ask because it seems like a possible way to buy under market value citing tenant risk all while working on improving lease conditions during the process.

    can a tenant be signed up to a new lease subject to purchase too?
     
    kmrr, 18th Jun, 2021
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  5. The Y-man

    The Y-man Moderator Staff Member

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    I defer to @Scott No Mates or @Beano regarding the contract conditions - but are you getting a loan for this purchase? Might impact the loan lvr too?

    The Y-man
     
    The Y-man, 18th Jun, 2021
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  6. Scott No Mates

    Scott No Mates Well-Known Member

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    This isn't a risk that the tenant should be exposed.
     
    Scott No Mates, 18th Jun, 2021
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  7. kmrr

    kmrr Well-Known Member

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    Presumably yes. Just a completely hypothetical scenario. I see some good properties for sale but often with weak leases. It would be a great to purchase if a new lease could be negotiated during the process.
     
    kmrr, 19th Jun, 2021
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