Possible Tenant doesn’t want to tell me business plan

11 Replies

I have a commercial building sitting vacant on a MHP I just purchased. It used to be a laundromat, but has been closed for several years. The rear of the building is a 2 bedroom apartment. I was contacted today by a gentleman wanting to lease the laundromat building. He did not want to tell me what business he wanted to start, because he didn’t want me taking his idea for myself. Is this normal in the commercial industry? How do you protect your building from being used for something you would not approve of, or that would be frowned upon by neighboring businesses? Do I put something in the lease agreement that states I can back out if I don’t approve of the business?

Huge red flag. You don't need all the fine details, but if they can't give you a general idea of what business they plan to operate in your building than you probably don't want them in your building. Somebody else who isn't going to run some sketchy secret business is probably perfectly happy to rent your space and tell you what they plan to do ahead of time.

All of those other questions depend on the terms of your lease. I would speak to someone familiar with your local lease laws/ regulations to make sure you hit all of the basics. Outside of that it's your building and as long as you aren't discriminating against any protected classes you kind of run the show.

Agreed on the NDA. You’re in the business of renting property, not poaching random business ideas. And if they want to run a laundromat, well... sorry that ideas been tried. You could also blame it on the lease/your attorney - “My lease says that the building can only be used for _____ purposes, and my attorney says I need to fill in the blank.” It’s unreasonable to expect a landlord to rent a space for just ANY purpose imaginable. What if the space isn’t zoned for it? What if the tenant causes a huge mess and then disappears to stick you with the cleanup? What if the “business” is illegal? What if the business causes a risk exposure to the property that wasn’t in your plans when you purchased the building? If the prospective tenant still insists on being cagey about it, I call shenanigans and would move on. Can’t have folks playing roulette with your hard won investment property.

Agreed with all other responses... red flag for sure, NDA should solve the issue. At the end of the day you can add all the disclosures and CYA statements you want to the lease, if your tenant is doing something illegal your building can be seized. 

In this day and age  (esp. in California), make sure you have viewed a couple issues of "Weeds" as well.

@Robert Naucke Jr Not normal at all. It's not uncommon to sign a non disclosure for that purpose, like others have stated, but why should he expect you to take on the risk of leasing to him, without knowing anything about what he's going to do?
Not to mention, you don't necessarily want to lease to just any business type. I'm not sure what the marijuana laws are where you're at, but here we have a lot of people that want to open medical marijuana dispensaries, but most landlords don't want to lease to them because it's such a grey area legally.
When I do commercial leases, I specify what type of business the tenant is allowed to operate out of the space. If they're going to be an Italian restaurant, their lease specifies they can operate an Italian restaurant, and nothing else. To go a step further, I usually specify which things can not be done in the property, like selling marijuana. 
I wouldn't even put yourself into a position where you have to back out of the lease if you don't approve. He's not going to find anyone else to lease to him with those conditions, so I wouldn't be too worried about losing him over it. 

Originally posted by @Robert Naucke Jr :
I have a commercial building sitting vacant on a MHP I just purchased. It used to be a laundromat, but has been closed for several years. The rear of the building is a 2 bedroom apartment.

I was contacted today by a gentleman wanting to lease the laundromat building. He did not want to tell me what business he wanted to start, because he didn’t want me taking his idea for myself.

Is this normal in the commercial industry?

How do you protect your building from being used for something you would not approve of, or that would be frowned upon by neighboring businesses?

Do I put something in the lease agreement that states I can back out if I don’t approve of the business?

 I'm no major domo commercial landlord, but I manage 10+ units in two commercial buildings.  In five years of doing this, I've never had an applicant not tell me what type of business they plan to run out of a unit.

There were two times that stand out where an applicant failed to list the type of business on the application and seemed kind of wary of telling me.  Turns out one was a computer gambling business and the other was an e-cig business.

I don't care why the applicant doesn't want to tell you, but if I don't know the business, I don't consider the application.  I owe it to my other tenants to know what's going in the same building.  Even moreso if those current tenants were residential tenants as in your case.

"No, your honor, I had nothing to do with this. I'm not a partner. I just figured, as long as they pay my rent, I don't care what they do in my building."

That would go over really well. 

In addition to an NDA, ask for either financials or a business plan. If he’s reputable, he’ll produce the docs in short order.

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