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Business leases upon death

Coping with a death is never an easy task. Unfortunately, for the executor and the business partners, it's a necessary follow-up to keep things running. While most business owners have a transition plan in place, sometimes a business dies along with its owner. When that happens, who gets the lease?

The law

A lease is binding, even in death, under California law. If a business shuts down, there is still an agreement to occupy the space and make rent payments on time which can hit an executor hard. Commercial leases are often long term and expensive, so it's an unnecessary burden to pass to your beneficiary. If it was a month-to-month lease, tenants need to give notice 30 days before vacating.

Your options

  • Negotiation after the fact
  • Many landlords are flexible. It's in their best interests to have a healthy business renting from them and they're more likely to recoup their investment in doing so. Typically, a landlord will make a good faith effort to fill the space and the executor-tenant can negotiate a buyout agreement.
  • Negotiation before signing a lease
  • Although the law states that a lease is valid through completion, tenants are protected if they include a clause regarding their death. Any business owner without a transition plan for an heir or partner to assume the business should include this so family or friends are not hit with the unexpected debt of a lease.

Along with your business plan and financing, your lease is a core component of your business. Negotiation of lease terms is common on all elements of the property itself: signage, parking, meeting regulatory codes and more. Make sure that you're also protecting your future instead of focusing just on today's sales and growth. Adding a basic clause to the terms can save your executor a lot of hassle and a lot of money in the event of an untimely death.

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