So you’ve decided to sell the assets and goodwill of your business and you may have a perfectly good buyer lined up offering the asking price. What you may not be aware of though, if you have a commercial lease, is that your landlord could scupper your plans.
A great deal of the goodwill held by a business is linked to its premises. Whilst you may have built up a great name for your business, a change in premises is likely to have a detrimental impact on your business, at least in the short term.
As such, any potential buyer is going to want to take over your lease. As a sole trader or partnership, your lease will be held in your personal name, as opposed to a company name, and therefore this will need to be assigned to your buyer.
The majority of leases prevent the assignment of a lease without the consent of the Landlord. The Landlord cannot withhold consent unreasonably or delay giving it for an unreasonable amount of time, however certain conditions can be applied to any consent.
Your Landlord may, for instance, want to see references for your proposed purchaser or see their accounts to ensure that they are of sufficient financial standing to pay the rent. If either of these fail to meet the Landlord’s standards then consent for the assignment could be refused.
Your Landlord may also require that you enter into an Authorised Guarantee Agreement as a condition of the assignment. This will mean that you effectively guarantee that the buyer will perform the lease covenants for the remainder of the lease term. For more information please see our blog on Authorised Guarantee Agreements.
If your Landlord does provide consent, a Licence to Assign will need to be entered into. This is a legal document whereby the Landlord formally approves the assignment and is entered into by all relevant parties, including the purchaser. You and/or the buyer will need to meet the Landlord’s costs for the Licence to Assign and this will include solicitors’ fees and likely the fees of an agent or surveyor and so you will need to budget for this cost.
Finally, once the Licence to Assign has been completed you will then be in a positon to formally assign the lease. Depending on the lease term and if it has been registered at the Land Registry, this will either be done by way of a Deed of Assignment or a formally transfer document called a TR1.
For further advice on the sale of business assets or transferring a commercial lease, speak to our experienced team at Farleys Solicitors. Call 0845 287 0939 or contact us by email.