A Brief Introduction About the Master Lease Agreement
Not everyone has sufficient funds for a down payment and perfect credit to get a commercial property? When you don’t have the required down payment amount and lots of money, then you need to opt for a master lease agreement. When you purchase a property, then you will pay him least or no down payment and get the right to operate and use the property as you want without taking legal ownership.
However, you will only get an equitable title for the property. The terms and prices will be set by you, and that’s why this agreement will always be beneficial for you. In case you make an income by utilizing the property, the value of the property will increase, and you won’t have to pay any extra amount for it.
Who Takes the Master Lease Agreement?
The agreement is signed between the buyer and seller of the commercial property. The person who wants to get a commercial property to start a new industry or office can sign this agreement with the seller without paying the total amount of the property. It also helps when a person is unable to borrow from banks or lenders. You can opt for this agreement as you can pay the rest of the money in the given time period. If you have a strong business plan for that commercial property, then you can definitely be able to get benefitted from this agreement.
Purpose of the Master Lease Agreement
The major purpose of the agreement is to allow both sellers and buyers to get the freedom to sell and buy property without any major efforts. The quick closing of the agreement makes it easier for the sellers and buyers to complete the deal. The buyer is also able to get good cash flow along with time to build up equity.
Contents of the Master Lease Agreement
The contents ideally include
- This agreement should have a title which should be clear, and there shouldn’t be liens in it.
- The seller should mention the space to be provided for the installation, operation, and maintenance of communications equipment.
- The agreement states that the buyer shall deliver the premises in a clean and hygienic condition- free of debris.
- The agreement elucidates the effective date. It also states the mode of payment, and if required, the bank routing information for such purpose
- It should be recorded against the property to get an appraisal.
- It should also include the services of the buyer in order to retain given possession of the property.
- There should be a sharp strategy mentioned for the exit of the document in advance.
- You need to make sure that the taxes and mortgage are paid on time and also have a disbursement company or any third party to pay it.
How to Draft the Master Lease Agreement?
While drafting a master lease agreement template, you need to include clauses and obligations in the agreement.
- The deal terms can be made flexible as per the needs of the seller and buyer both.
- Outline the provisions you plan to include
- The date of commencement
- The length of time the agreement will be in effect
- The amount and the duration
- Describe the consequences of late payment.
- Outline the rights and responsibilities of both the parties
- Lays out the procedure for handling lease violations
It will be best to take the help of the professional lawyer who is well-experienced so that all obligations and clauses are added in the deal to avoid any disputes later.
In the case of master lease agreement commercial real estate, all you need to do is make sure that you get the terms written in your favor as deemed possible. The sellers and buyers can negotiate on the terms as they want, but if a clause has been mentioned in the agreement, then it is not necessary for the seller to accept the negotiations made by the buyer.
Benefits and Drawbacks of the Master Lease Agreement
If you want to get a master lease agreement apartment, then it would be beneficial for you just like it is when you purchase commercial property. It becomes easier for the seller to sell his property due to the presence of this agreement. The seller can also get lease payments for property equity every month that is paid by the buyer.
The seller doesn’t require to worry about any work going on the property after signing the agreement. The buyer is able to get the property without having to contact lenders and the bank for money. The buyer can get profits that are above the mentioned. There is no requirement of banks in the master lease agreements, and that’s why sellers and buyers look forward to choosing it.
What Happens in Case of Violation?
When someone violates this agreement(1), then one has to pay for it, as written in the agreement. There can be chances that the buyer might not pay the amount on time, and this should be mentioned in the agreement so that the seller doesn’t have to face any loss or delay in getting payment.
The master lease agreement is mostly beneficial for the buyers, but it can be best for the sellers when you are finding a trusted buyer, and there won’t be any chances of fraud. All in all, this is a good deal for both parties if the decision is taken, considering all the things in mind.