How the structure works
In a sale and leaseback, the owner sells the property to an investor and signs a lease to keep occupying it, often a long lease in which the tenant pays taxes, insurance, and maintenance. The price and the rent are linked, so a higher sale price usually means higher rent. Some agreements include an option to buy the property back, and depending on how it is written, a court or tax authority may treat the arrangement as a loan rather than a true sale, which changes how it is handled in a bankruptcy and for tax purposes. For homeowners in financial distress, New York has a specific law aimed at equity theft that regulates these arrangements, with protections the transaction must respect.
Terms to negotiate carefully
Focus on the rent and how it escalates, the lease term and renewal options, and who bears capital repairs such as a roof or building systems. Assignment and subletting rights matter if you might later sell the business. Repurchase options or rights of first refusal should state the price or formula and the timing clearly. Check how the deal handles existing mortgages, transfer taxes, and the condition of title, since the closing will require each of these to be resolved. If the tenant is a business entity, expect the buyer to ask for a guaranty or ongoing financial reporting, and negotiate how far those reach.
Before committing
We review the purchase contract and the lease together, since the two documents were negotiated as one bargain. We compare the arrangement with alternatives, such as refinancing or a straight sale, and coordinate with your accountant on the tax treatment. For residential owners approached by investors offering to buy and rent back their home, we look at the offer closely before anything is signed, because these deals are a common setting for abuse. A sale and leaseback agreement is hard to unwind once recorded, so the review belongs before the closing date is set.
