What should I check in the lease before buying a business?

For a business that depends on its location — retail, food service, many personal-care and professional practices — the lease is close to as important as the financial statements. A great business on a lease that is about to expire, or cannot be assigned, is a different purchase than the numbers alone suggest.

Term, renewal and rent

Confirm exactly how much term is left, how many renewal options exist and on what notice, and how rent is calculated for any renewal period — a market-rent reset can change the economics significantly compared with a fixed escalation. A short remaining term with no renewal option left is one of the more common surprises buyers find only after they have already committed.

Assignment and permitted use

• Whether the landlord’s consent is required to assign, and on what standard
• Any assignment fee, cost-recovery clause or right of the landlord to reclaim the space
• Whether the permitted use clause matches exactly what the business does today
• Whether the buyer’s intended changes to the business would fall outside the permitted use

Guarantees and security

Check whether the current owner has given a personal guarantee, and if so, whether that guarantee is released on assignment or continues to expose the outgoing owner. As a buyer, understand whether you will be asked to give a personal guarantee yourself, and how large a security deposit the landlord may require given your credit profile compared with the seller’s.

Confirm the landlord’s own position

Ask for an estoppel certificate from the landlord — a written statement confirming the lease is in good standing, rent is current, and no defaults exist on either side. This protects a buyer from inheriting a dispute the seller has not disclosed, and a landlord’s willingness to provide one promptly is itself useful information.