Can someone also protect their business's lease if a business fails?
Posted on Jan 16, 2017 5:00am PST
The office location may be a business’s most important asset. That
is the case for many businesses. So a good lease needs special protection.
The strategy is not to have the operating business directly hold the lease.
If it directly holds the lease, the bankruptcy court can transfer the
lease to a buyer. If you lose your lease, you lose your business. But
there are several ways to protect a lease. One solution is to hold the
lease through another entity and have the landlord consent to allow you
to assign or sublet the lease and location to your operating company as
a tenant-at-will. You would then continue to control the location if your
business fails. For example, you might evict your failing business and
sublet the space to a successor business that you’d own at the same
location – under a new sublet agreement. Or the landlord can permit
you to pledge or assign your lease as collateral security to a friendly
mortgage holder. If your business fails, that friendly mortgage holder
can then rent the space to your successor business or to any other business
that you designate.