Ask Owner for Payout Agreement in Tough Times

If your business is located in an area where the local economy hasn’t been doing well, your sales might have been slow—and now you’re dealing with unexpected increases in year-end operating expenses, which are more painful than usual. There’s a solution that could work for you and the owner if it would rather work with you than have to evict you. One option that has consistently worked for both tenants and owners in this situation is the “payout agreement.”

Under this type of agreement, you, the tenant, agree to pay the increased operating expenses with scheduled payments over a designated period of time. The agreement outlines the amount and due date of each payment. However, be prepared for the owner to request certain information, such as producing financial statements. Make sure these statements are detailed, accurate, and up to date, as you’re going to have to prove that you need the payout arrangement.

And understand that if the owner grants the request for a payout agreement, it will want the agreement in writing. As a tenant, you might think that an oral agreement is sufficient. But most owners will disagree because oral agreements tend to turn into expensive, drawn-out disputes that can’t be easily settled in court.

For six more requests that you’ll likely get from the owner in order to make a payout agreement work, see “Prepare for Eight Requests from Owner Giving Payout Agreement,” available to subscribers here