Buying a Business – The Business Premises

There is often a misconception that buying a business will automatically include the premises occupied by that business.

Where the premises are freehold, then the business sale agreement can be drafted to incorporate the required terms for the sale of the freehold property with the business. However, where the property is a leasehold in the name of an individual(s), then it must be noted that transferring the premises will be a separate transaction in itself, and it will therefore need to be dealt with separately from the business sale agreement.

A leasehold property means that the business owner (tenant) will have taken a lease from the landlord of the property. The lease is therefore a legal contract between the tenant and the landlord. To transfer the property will mean having to transfer the lease it is subject to. A business sale will therefore most often require that the lease is transferred to the buyer of the business. If this is not done, the buyer will not have any right to occupy the property despite the business already occupies the premises.

Briefly, the transfer of the lease will involve the following legal documentation:

1. The landlord’s solicitor will draft a Licence to Assign – this deed gives the current tenant permission to transfer the lease to the new tenant.

2. Some leases require the current tenant to enter into an Authorised Guarantee Agreement – this means that the current tenant will act as a guarantor to the landlord against the new tenant failing to pay rent and other outgoings due to the landlord under the lease terms. The Authorised Guarantee Agreement will also be drafted by the landlord’s solicitor.

3. The current tenant’s solicitor will draft a Lease Assignment deed which deals with the actual transfer of the lease to the new tenant.

The legal documents should to be drafted by a lawyer. If you are contemplating transferring a freehold or leasehold property, then get in touch with one of the lawyers in our Commercial Property Department who will be happy to advise and assist.

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