Im buying a commercial building in minnesota and there is a huge franks sign on my property. question is does a new lease get drawn up or am i stuck with the lease from previous owner. i ask because he isn’t getting but 200.00 a month for it. i think the size is about 14’x 48’ seems to me it should be much higher on a hwy that sees a lot of traffic. and it is double sided. how can i get out of previous owners lease?
Most leases are designed to survive a new owner. This is so the original lease holder doesn’t get screwed by a new owner who is unfamiliar with the industry or history. So, chances are you’re going to be stuck with the current lease until you can terminate it by way of its termination clause.
200 is actually pretty standard, depending on your market. Billboard owners shoot for leases that are about 20% of what advertisers will pay for the location.
When and if you do renegotiate the lease, I would suggest you opt for a percentage-based lease. These leases benefit you in good times but don’t ruin your tenant in lean years. A percentage-based lease is more work to maintain for both parties, but if fluctuations in the market are worthwhile for you to monitor, they help ensure that both parties always get a fair deal.
Hope this helps!