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Building foreclosed - what's a leasee to do?

Many businesses opt to lease the space in which they work for a variety of reasons. Perhaps they cannot afford the financial outlay required to purchase a space, or they plan to buy a space when the business grows. Whatever the rationale, there are pros and cons to renting office space.

One pro is that if something goes wrong in the building, for instance, there's a leak, the plumbing goes haywire or something else occurs, the business only needs to call the building owner to get the issue fixed. If the business owns the building then any repairs would be the business' responsibility to handle. On the flip side, if the owner of the building is slow to make repairs, this can have a negative impact on customers and the business could suffer. Another consideration is potential growth for a business. If the business is starting small, then a large space might not be necessary at first. Buying a building to meet current needs that might not meet the business's needs later could be an unwise business move.

For some businesses though, the real estate crises has left them literally out in the cold. A business that is leasing a building could find itself in jeopardy of closing if the building's owner gets behind in payments and is foreclosed on. If this happens, a business that did everything right could still be at risk of having everything go wrong.

A business that finds itself in this position faces several obstacles. First, the business has to defend that it was not their practices that led to the crisis. Once a leasee pays the landlord, what the landlord does with the funds is up to him or her. Having proof such as canceled checks and receipts help with the business' defense. This defense will help once the business starts to search for a new location.

While searching commercial property for new office digs, a business might want to consider buying instead of renting. In many markets, it is now cheaper to own property than it is to rent it, so even though repair and upkeep would be the business's responsibility, it could be worth it financially. But the pros and cons of ownership versus renting should be revisited before a permanent decision is made.

Whichever approach a business decides to take, the transactions should not be completed before the business owners get sound legal advice from an experienced legal professional. This sounding board could help a business owner determine the best course of action that will ensure the business doors stay open.

Source:, "The location of SWAT Fitness Club west of Kalamazoo appears to be up in the air" Al Jones, Aug. 07, 2014

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