Are there guidelines for a landlord to calculate lease amount for a business operating on 35 acres?

UPDATED: Jan 18, 2011

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Are there guidelines for a landlord to calculate lease amount for a business operating on 35 acres?

We own approximately 35 acres which we have a triple net lease agreement/contract with an individual that is coming up for renewal. The land has been used for operating a dirt race track for the past 88 years. We have also allowed the tenant to operate a successful landscape business . The new lease will be set for a 5 year period. Are there any guidelines for calculating what should be charged – such as dollar value per acre, or a percentage of the value of the land, or possibly a percentage of their yearly income? Not sure what is appropriate. Should we speak with a business law attorney? In Bloomington, IN.

Asked on January 18, 2011 under Real Estate Law, Indiana


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 12 years ago | Contributor

There are no "legal" guidelines--a landlord may charge whatever a he or she wants, or whatever the market will bear. In terms of practice, since the market is the key determinant, you should look at what similar land, similarly situated or located in your area, leases for. That will give you an idea of market rate. You can then adjust that based on relative leverage (i.e. how badly does the tenant need to stay; how badly do you need to rent?) and other factors, such as the value you ascribe to the relationship. I would--speaking as a businessman myself, rather than as an attorney--advise against charging based on the tenant's yearly income; that is susceptible of "manipulation" by the tenant--even without any ill-will towards you; e.g. just in the name of managing their business and their tax liability--which means it's not an easily determined, set amount.  You want to have a predictable income stream where you don't need to try to get access to someone else's "books" to see what you are owed.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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