Disadvantages to Sellers of Sale-Leasebacks Sale-leasebacks do have a few disadvantages that affect sellers. The main disadvantage being some loss of control of the property. For instance, major changes or add-ons might need the new owner's approval.
Another issue involves taxes. While a marginal or unprofitable business can benefit by pulling cash out of the property in a sale-leaseback, there will be little or no tax benefit to engage in the transaction. Finally, the reassessment of property taxes at the sale of the building is something to seriously consider. Florida, for example, has experienced a dramatic rise in property values over the past 20 years. If the business has owned the property for a long period of time, there is a reasonable chance that the sale will trigger the property appraiser's department to take a closer look at the value of the property and hence the tax assessed value of the property. Since most sale-leasebacks are structured in a net lease arrangement, meaning tenants are responsible for paying taxes, in all probability, the result will be the selling business and future tenant will end up with an increased tax bill. It is important for you to consult with your tax advisor before making any decisions on the financial viability of a sale-leaseback for your business.
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