If you have a large plot of hunting land or a commercial warehouse for a defunct business, you can sell those properties with relative ease so long as you can find an interested buyer. The ability to move on from commercial property becomes a little more complex if you have tenants residing in the property you own. For example, you may own a couple of duplexes or have a majority stake in an apartment building. There are some additional processes that will need to be followed if you’re hoping to sell your commercial property with tenants, and we’re going to discuss how this sale can be completed if you’re looking to move on from a commercial investment property with tenants in today’s blog.
Commercial Property Sale If You Have Tenants
If you’re planning on selling your commercial property but you have tenants, you’ll first need to look into the type of lease agreement you’ve entered with them. Your lease agreement will help guide how this sale can proceed.
The simplest type of lease agreement for a property owner in Minnesota to navigate is a month-to-month lease. This lease provides more flexibility to the tenant as well, because they are not locked into a long-term lease, and it’s easier for them to move on short notice if a job or family matter requires them to head elsewhere. In these instances, the commercial property owner needs to inform the tenant in writing of the intent to sell the property, and they typically need to give at least 30 days notice. As long as you give proper notice, you can sell the commercial property with relative ease.
Longer leases can prove a little trickier to navigate. For example, let’s say that you rent out a property year-to-year. There are a number of ways you can continue to move forward with a property sale despite having a longer fixed-term lease. Some of those ways include:
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Wait For Expiration - If you renew the lease every July 1, simply wait for the lease to near its expiration to inform the tenant of your intent to sell, while still respecting the 30-day notice period.
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Selling To Investor Who Accepts The Lease - Another easy way to navigate this situation is to sell to another investor who is willing to assume the current lease agreements. Many investors are happy to assume current lease agreements, as this means they already have paying tenants.
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Agree With Lease Holder On Early Termination - You may be able to strike a deal with a tenant to get them to leave a property early in the event it is necessary for a sale. You could offer them a specific cash amount in order to terminate the lease early, but you will need to get this agreement in writing.
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Sell To Tenants - You can end a lease agreement early if you decide to sell the property to your tenants. They may be looking to acquire a property they’ve been renting, and if they want to buy your property, then ending the lease will be part of your sale agreement.
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Explore Default - Although it’s less amenable than the previous tactics, you may be able to force an early end to a lease agreement if a tenant is in clear violation of your agreement. If you can prove criminal behavior, a default on rent or another violation in the lease (like pets or subleasing, if expressly prohibited), you may be able to sell a property and give the required 30-day notice even if the lease has yet to expire. You’ll want to consult with a professional if you’re hoping to terminate a lease on these grounds.
Most commercial investors can sell their property with tenants with ease so long as they are mindful of current lease agreements or ensure that their tenants’ rights are protected throughout the course of the sale. At Commercial Partners, we can ensure you and your tenants are protected throughout the course of your sale so that you can move on from a property with ease. For more information about selling a commercial property in Minnesota if you have tenants, or for help with a more standard commercial transaction, reach out to the team at Commercial Partners today at (612) 337-2470.