Heres a fun story for you guys to feast on… Our landlord assumed ownership of a run down billiards hall a couple doors down about a year ago (b/c the owner was late on rent). He has since then remodeled it into a bar, and food establishment and its been operating in full for about 4 weeks now. Well, as you know, we’re not making it here and my father and I are interested in selling it. So being the curious guy I am, I wrote him a very kind, reaching-out email asking him for some opinions, or options we have (which somehow was read by some of his staff, and yes one guy admitted that he read it even tho it wasnt addressed to him…). So he then shows up in my front a day later and gave us the option to pay in full or to walk away with nothing to stop ALL the bleeding and he would assume ownership and all current debt to vendors/utilities. Just wash our hands and move on (hmmm, sounds familiar?). Anyways, he REALLY wants this place for nothing b/c he will cross promote the bar and pizzeria together. During that conversation he basically mentioned that the place was already in the works to be foreclosed on and his lawyers are already working on the paper work and he claims ‘we should be getting served any day now’. Wow… So he then comes in here today and asked if we made a decision and I said not yet. So he then says well then I’ll have my lawyers continue the paper work and you should be getting served soon, sorry.
We didnt pay Sept rent, and up until a couple months ago we were always paid on time, everytime, in full. He even has lasts months rent and a security deposit (4500 bucks) from us sitting on reserve. Lately its been extra rough so we’ve missed the Sept payment. We JUST gave to him last week paid in full including a late fee. Well its now the 7th and we’re a week late for October. Just 6 days and he’s already threatening to boot us out. Hes made it very CLEAR that he wants this place.
If we find a buyer that has good credit and good references, can the landlord refuse to resign the lease under his name? How does that transition work IF the landlord just wants it for himself? What rights do we have? Can he really just take everything over a being barely late on rent? What judge would allow that?
We are obviously going to get our lawyers involved, but I wanted to get an understand from a pizza operators perspective first. I’d really appreciate any feedback.
For some reason I thought you guys had already closed. Anyhooo, I’m no attorney, and perhaps you should seek one out. Off the top of my head, the #1 pitfall of leasing is the lease. Unless you have an ironclad lease over a period of time, with options for extensions, and (this I really doubt) a provision for letting someone else assume, then you’re out of luck.
If I recall, you guys haven’t been open that long, and I don’t remember your lease period. Selling in the general sense is not an option - you don’t have anything of value. Unfortunately, now that you have a hostile landlord, your 3 options are:
1 - Asset sell and leave during the night (you can still be sued for the broken lease, fees, etc…)
2 - Build a successful business and pay your landlord on time (really only an option if you’re locked in for a long term, if not you’re wasting your time because he does not have to renew your lease.)
3 - Go by his terms, and turn it over to him (with appropriate releases).
By no means, a good situation. Best of luck to you.
Dude, Get the hell out of there. You don’t have the money for a lawyer, and in any case you will probably lose. Speaking of losing, you are losing money and haven’t recouped your initial investment. There is no equity in the place either, so write off sweat equity. Beg the owner for $10,000 for the equipment and take a walk from that loser.
You are already losing the war for profits, fighting on two fronts will just kick your a$$. You just aren’t cut out for pizza shop ownership. Sales aren’t going to get strong again for a few months, and won’t return to ‘the good old days’ for years.
The idea of selling an unprofitable pizza shop really isn’t sound either. You can’t throw a dart without hitting a pizza shop for sale for $30,000, or a pizza equipment auction for $100,000 worth of equipment selling for $10k. It is time to bite the bullet.
Thanks for the input. The term was 3 years with a 3 year option. Have a year and 8 months left I believe.
Pizzamancer… I wasnt asking advice whether I am cut out for ownership or whether or not I can or can’t sell the place as is… We all know that I’m not cut out for this and you’re right. But I already have some people that are showing big interest in buying the location turn-key, obviously pennies on the dollar and we understand that. Unlike you guys, they get to physically come here to see the storefront, meet me, taste the pizza and see how well the location could be with the right people backing it.
Not to beat the point, but the only folks permitted to run a shop there is most likely you and your dad. A hostile landlord will simply jump you on your lease agreement (I’d take the time to really, really go over your terms again). I’ve seen some leases that not only added a late fee after 5 days, but also voided the lease agreement.
AND, if he’s intent on taking over the location, YOU WILL NOT BE ABLE TO SELL YOUR BUSINESS. He won’t sign them to a new lease. Read your lease carefully, if you have the appropriate exceptions, you might have a little more clout. BUT, I think he smells blood now and will definitely be on your tail.
I don’t care if you didn’t ask for advice about it, your deal with him is only going to get worse. He offered to let you walk away free and clear. Think about it. You are behind on rent, behind on your finances, and I can only infer behind on other bills. Do not look this gift horse in the mouth. Take the deal and run.
You do have a copy of the lease don’t you? All this is spelled out for you there. The consequences of what you are asking will be very specifically detailed. Its not fun reading a lease but its all there.
Btw, if you have the gonads for it, you could try asking for some money for the equipment as pizzamancer said. Tell the landlord your will vacate immediately and sign off on it in return. The landlord does not have to, but it would be cheaper for him to pay you off for turning over the space rather than getting lawyers involved and the courts. Time is money to him as well.
He made a huge mistake in accepting your late payment for September. By doing that, he has basically agreed that it was okay for you to pay late and that he won’t evict. Check the tennant/landlord laws in your state. I know in mine, if a landlord does that, he has tied his eviction hands for a while…
Not the case any more Guest. In most jurisdictions, the landlord does not need to state a reason for the eviction. Your post is basically just an urban legend at this point. Even if the jurisdiction was one that needs reason, the payment was accepted only once. With no history, it is impossible for Steveo to prove that there was an agreement, verbal, written, or otherwise that allowed him to pay the rent late.
Either way, you do him a disservice by throwing bones like that. Do you really think he should hold on to his shop?
As far as throwing bones, I’ve made it known in brutal detail what I think of him staying in business. I’ve resigned to not commenting on that anymore.
As far as my post being urban legend, you might think that, but that’s not the case, at least not in my state. It’s pretty simple to show there was an agreement that allowed him to pay the rent late - the fact that the landlord accepted the late payment - and the date of his canceled check! In my state, there are 2 basic ways to evict - lack of payment and breach of contract. If they choose the lack of payment method, it takes forever and there are ways the tenant can remedy the situation and stay. Most landlords choose the breach of contract method, by saying that the tenant breached the contract by not paying on time. Yes, same thing - but technically different. There is no remedy to the breach of contract method. However, if the landlord accepted payment that can be considered in determining if the contract was actually breached or not. The landlord should not accept any payments if they want to go the breach of contract route - and after the eviction then sue for the amounts owed.
You are in default of your lease due to non-payment. You have no rights to asign the lease while it is in default (if you had rights to in your lease to begin with) AND you still owe the landlord ALL the rent. Most likely, since you are clearly innexperienced in leasing, your lease give the landlord a security interest in your business property which means he can take the stuff to offset the money you owe him.
Unless I am missunderstanding something, foreclosure is not what is happening to you. That is when you own not when you are a tenant. If his attorney is working on something that they are going to give to you, it will be a notice of default, followed by eviction. Unless your lease calls for a specific proceedure to be followed, he can have you out of there and seize your equipement pretty much right away.
Registered GuesT, you are dreaming. The Landlord’s acceptance of a late payment does NOT constitute an agreement of any kind. Furthermore, you are confusing residential eviction rules with your situation and they are unrelated.
Stop kidding yourself about being able to sell the business in the current situation, you can’t. If you really have buyers, get your lease current and get a written statement from the LL that the lease is not in default… THEN try to sell it.
We will be current as of tomorrow. Does he have the right to just pick and choose who he wants to kick out? I’m positive there are other tenants that are not current and/or have been late multiple times… If he did this to everyone, he would own every business that was in one of his strips.
I wish it was that easy to just get the hell out. Regardless of the outcome, I dont think the answer is to just walk away with nothing. And I’m talking about my father, not me. I wont see a dime pretty much no matter what happens.
HE DOESN’T HAVE TO LEASE TO ANYONE: INCLUDING SOMEONE YOU COULD ENTICE INTO BUYING IT!
Now, its out there, just keep that factoid while you and your Dad are planning your exit strategy. And by all means, thats what you are and should be doing.
Its okay for a little hope, just plan for a dose of reality splashed on top of it.
Yes, the LL can pick and choose once default is in the picture. He does not have to treat everyone equally.
When your lease is in good standing, what he can and can not do it determined by that contract.
When your lease is in default, what he can do is partially defined by the lease if you wrote a good lease. If not, he can throw your a$$ out of there and take your equipment and STILL go after you for the rent.
IF, repeat IF your lease is in good standing, your ability to assign the lease is controlled by the assignment clause of the lease. Typically, you can assign the lease to someone with good credit with the LL’s consent. If the lease is well written, the LL must give this consent to a good tenant. If the lease is not well written, you are at his mercy.
If you are in default (what rights you have to cure default are another whole topic), all bets are off with regard to assignment.