Your lease will expire! And that effectively extinguishes the value of your asset, the goodwill right there.
In most retail businesses with anything less than two years left on your lease means the business has little or no goodwill value. You have nothing you can sell.
So if your lease is going to expire soon, even if you have up to two years left, and you hope to sell the business for anything like its true value then you need to start planning for renewal of the lease now.
And renewing a lease is probably one the most important transactions you will undertake in the life of your retail business.
Take a moment to consider the fact there is no legal obligation on your landlord to renew your lease and without a lease a retail business is worthless.
Besides rent there are many other factors that will determine the cost of premises and hence the value of your business, these include:
● The rent review clauses.
● Turnover rent rate and mechanism.
● Outgoings cost – will the lease be net, semi-gross or gross. It may be different to your old lease.
● Any obligation to re-fit or re-paint the premises.
Do not try it this on your own!
You will also have to read and understand the necessary documentation including:
● Tenant Guide
● Offer to Lease
● Disclosure Statement
● Form 2 – Notice Of Election That Rent Be Determined By Reference To Turnover
● Application to The Commercial Registrar for Termination Clauses
● Lease Documents
● Plans
● Retail Fit Out Guide
Even if you decide to vacate it will cost money to remove the fit out. This obligation can be negotiated so get advice even if you plan not to renew the lease.
