Lease Agreements
Many businesses operate on physical premises with lease agreements. Understanding the duration, rent, and responsibilities you would have as the new owner of a business as a lease is transferred to you is imperative. If you have a short remaining term left on a lease agreement that is transferred to you this requires forethought and planning before the business sale is finalised to facilitate a smooth handover and to avoid potential risk.
First and foremost, you must gain landlord consent, a process that is key to have completed before the finalisation of the business sale. While trying to obtain landlord consent, the landlord may ask for your CV, credit score, and financial statements to assess you as a potential tenant. With these checks completed, and if accepted, the lease can be transferred using a deed of assignment.
Responsibilities and Obligations
Before signing the transferred lease, it is key for you to read over the agreement to ensure you are happy with your lease obligations from the current rent, to how often it is reviewed and the basis for rent increase.
Secondly, confirming which responsibilities for maintenance or repairs on the premises are under your care or the landlords is important, including any other outgoings such as rates and insurance. This includes if there are any obligations regarding an existing fit-out or any chattels that are included in the lease.
Having a lawyer review your lease agreement to identify potential unusual or unfavourable terms is also another avenue you can use to ensure you are empowered to make informed decisions with your business acquisition, particularly for clauses that might allow the landlord to terminate the lease early or impose additional costs.
Being on the front foot when it comes to a lease agreement is one step that makes the transition into your new business that much smoother.
Property Transfers
If you are acquiring a business which includes a transfer of ownership of property, conducting the appropriate due diligence will allow you to navigate the business sale equipped and informed to make choices that are aligned with your goals and needs.
Due Diligence
Conducting due diligence on the property that is included in a business sale will put you in a position of confidence, entering negotiations armed with all the details and information you need. It will also enable you to take ownership of a business with your eyes wide open to the broad spectrum of assets it has and your obligations and responsibilities regarding these assets.
Firstly, doing a title search to confirm the seller’s ownership and to identify any restrictions or covenants on the property is key.
Due diligence includes evaluating the condition of the property, any existing licenses and encumbrances, zoning regulations, as well as any planned developments or changes in the area that could impact the business.
Completing your proper due diligence also includes getting an independent valuation of the property to ensure the price the vendor has placed for the property is fair and reflects its true market value.
Seeking the advice of a solicitor who has specific experience in commercial property and business transactions will support you in identifying any important details that you should be aware of when deciding to acquire the business. Supplementing this by consulting with an accountant to get a full scope of the financial implications and costs there are involved with the property transfer, including legal fees, registration fees, and any taxes involved.
Purchasing a business wherein there is a transfer of property is a significant commitment, exploring financing options could be an avenue that empowers you to take this step. If you choose to finance your business, it is essential to understand the terms and interest rates of your agreement.
Buying a business where there is a transfer of a lease agreement or property is an exciting opportunity as well as one to get ahead of, to understand your responsibilities and obligations to gain full insight into the business and its premises you are agreeing to take ownership of. Getting on the front foot empowers you to make informed decisions and to enter negotiations with your eyes wide open to every aspect of the business and its assets and risks. Handling the transfer of lease agreements and properties with the right support and advice in place allows for a smooth transition and for you to take the reins of your new business with confidence.
