Leases

The Landlord – Tenant Profit Competition

The reality is that Landlords and Tenants are in competition for profit. Profit is the basis of the value of their respective enterprises.

The Landlord’s profits depend on the cashflow from the Tenant’s rent. The Tenants rental obligations are formally ‘contracted’ by the lease agreement providing the Landlord with a cashflow secured by a ‘formal contractual’ arrangement in the Lease. That provides less risk to the cashflow not being received and reduces the risks to the value of the Landlord’s property. Additionally, the higher the Landlord’s profit from rent, the higher the value of the Landlord’s property.

The Tenant’s profit is also the basis of the value of the Tenant’s business enterprise. The Tenant’s rental obligations have a direct impact on the Tenant profit. The higher the rent, the lower the Tenant’s profit, the lower the value of the Tenant’s business. Additionally, the Lease may have a direct impact on the saleability of the Tenant’s business. If it is un-saleable, it value is likely that its value will rest on the liquidated value of its assets less any ‘make good’ provisions in the Lease.

Small business owners need to be well aware that there is direct competition between their business  value and the Landlord’s property value. Adding to the Landlord’s property value at the expense of the value of their business and its saleability may not be an ideal situation for them.

If you need more information or help, please talk to me

Graham Long

0428-649-791

Kevin Lovewell

M: 0401-308-385
E: Click here to contact Kevin Lovewell
Member & Registered Business Valuer
Australian Institute of Business Brokers

Graham Long

M: 0428-649-791
E: Click here to contact Graham Long
Member & Registered Business Valuer
Australian Institute of Business Brokers

Kevin Lovewell

M: 0401-308-385
E: Click here to contact Kevin Lovewell
Member & Registered Business Valuer
Australian Institute of Business Brokers
What others say about Kevin Lovewell

Graham Long

M: 0428-649-791
E: Click here to contact Graham Long
Member & Registered Business Valuer
Australian Institute of Business Brokers
What others say about Graham Long

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