By Giorgio AndonianPublished On: May 19, 2025

Why Lease Terms Can Make or Break Your Sale: Legal and Market Insights for Tire & Auto Repair Centers

If you’re a business owner—even if a sale is years away—one of the most overlooked but crucial decisions you can make today is how your lease is structured.

The Legal Trap That Can Kill Your Deal

A poorly negotiated lease can derail the sale of your business—even when you’ve found the perfect buyer. The problem? Assignment clauses.

Here’s how it typically plays out:

- You find a buyer and are ready to close the deal.
- The landlord steps in and says, “I’m leasing to you, not this new buyer,” and refuses to approve the lease transfer—or demands significant concessions to do so.
- The buyer walks or asks for a lower price.
- Your deal is delayed, renegotiated, or worse—dead.
- I recall a specific transaction where a landlord delayed a lease assignment for 18 months and demanded a significantly higher rent and put the entire deal in jeopardy.

Make Your Lease Freely Assignable in the Event of a Sale of Substantially all of the Assets or Equity of the Business

Push for language like:

- Automatic assignment upon sale.
- Consent not to be unreasonably withheld.
- At a minimum, notice-only requirements or waivers of consent if the buyer meets financial thresholds.

This negotiation may be uncomfortable now—but it will protect your business’s value and marketability down the road. Your landlord may ask why you are bringing this up now and get a little shaky. How you approach this conversation is crucial. I suggest using available market data to show the M&A activity in the space and how these acquisitions have improved real estate value for landlords through improved CAP rates.

If You Own Your Property, a Strong Lease (and Tenant) Can Significantly Boost Real Estate Value

If you own your real estate, or plan to do a sale-leaseback after selling your business, the structure of your lease—and the type of tenant—can have an outsized impact on the valuation of your property.

Here’s why:

Buyers of commercial real estate, especially in the automotive and collision space, are focused on risk. They reward stability, predictability, and tenant quality with lower capitalization (CAP) rates, which translate into higher property values.

Let’s break this down with a simplified comparison (for illustrative purposes only):

A property leased to a top-tier national tenant with a 15-year Absolute NNN lease can be worth $1.25 million more than the same property leased to a local or regional business on less favorable terms.

According to the March 2025 Collision Market Report by Marcus & Millichap:

- Absolute NNN leases with national tenants and long terms (10+ years) are trading in the low-6% CAP range, with some deals even lower.
- NN leases with shorter terms or with lesser-known tenants are often priced 100–200 basis points higher—sometimes 8%+ CAPs depending on location and lease details.

The Takeaway for Business Owners

Whether you’re prepping for a sale or just being smart about long-term value creation:

If you lease your location

Review your lease for assignment rights. If necessary, renegotiate to allow for automatic assignment in a sale.

If you own the real estate

Build value now by ensuring your lease structure is appealing to future investors—think Absolute NNN, long-term, and with renewal options.

If you’re selling the business and keeping the property

Understand that a strong lease with a reputable buyer can dramatically increase your long-term cash flow and property value.

Your lease is more than a monthly obligation—it’s a strategic asset. For some owners, the real estate is ultimately worth more than the business, depending on how the lease is structured.

Giorgio Andonian is a Managing Director at FOCUS with a proven track record of success in orchestrating strategic direction for mergers and acquisitions in the Consumer and Automotive Aftermarket industries. Mr. Andonian joined FOCUS in 2019 to work on sell-side, buy-side, recapitalizations and capital raises for middle market businesses within his respective industries. As a leader, Mr. Andonian has a wide lens of leadership from his 15+ years of operational experience. Prior to joining FOCUS, Mr. Andonian was vice president of a regional tire chain in Southern California overseeing all aspects of the operation, including sales, marketing, finance and human resources growing the business and preparing for an eventual exit to a private equity platform. Before that he worked at another Southern California tire chain, where he held a variety of positions, including finance, business analysis, operations and supply chain management. Mr. Andonian earned a Master of Business Administration, with an emphasis in finance, from Pepperdine University’s Graziadio School of Business and Management. He also has a Bachelor of Science in Business Administration, with an emphasis in finance and supply chain management, from the University of San Diego. He holds several licenses and certifications, including Series 79, Series 82, Series 63, and a California Real Estate License.