How To Transfer The Premises Lease If You Sell Your Business

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There may come a time when you require your commercial lawyers from to assist you in the process and legalities of selling your business. As you might expect, selling a business is not something that should be done without due process and due diligence, and given that the transaction may involve huge dollar amounts, it requires each element of the sale to be properly thought through and enacted.

One of the matters which will require particular attention if your business operates out of leased premises such as a retail store, an office, or a manufacturing facility, is the process of transferring the lease for those premises to the new owner of your business. This will depend upon whether the new owner wishes to keep the business in its present location and thus its current premises or chooses to move the business to a new location and new premises.

If they wish the business to remain where it is then there needs to be action taken so that they can become the new tenants of those premises. This can be achieved in one of two ways. The most common way is for you to assign the lease for the premises to the new owner. The second way is for you to end your lease by surrendering it, and for the new business owners to concurrently negotiate and agree to a new lease with the commercial landlord.

Both of these options rely on you to consider the implications for you, and once again it will be prudent of you to seek the input of your commercial lawyers, and possibly your financial advisors too.

Some of the considerations that need to be factored into any decision regarding the lease include:

  • Is the commercial landlord willing to let you terminate your current lease and then negotiate a new lease with the buyers of your business?
  • Would the commercial landlord prefer that the lease be reassigned to the new owner?
  • Does the purchaser of your business accept the terms of the lease which is to be assigned to them?
  • Whichever option is followed, you, the new owner, and the commercial landlord will need to negotiate the details of surrendering the current lease, agreeing to the new lease or the reassignment of the lease as part of the overall agreement to sell/purchase your business.

Surrendering Your Lease

When the agreement is for you to surrender your lease and for the purchaser to enter a new lease, for your part this is relatively straightforward. Assuming all rents and other fees due to the commercial landlord have been by you in full, your lease will terminate on an agreed date. Invariably, and to avoid any unnecessary cross-over, that date is usually the same date that the purchaser’s new lease takes effect. Note their new lease may have different terms than yours did.

Assigning Your Lease

Assigning a commercial premises lease requires the agreement of the three parties, namely you, the purchaser, and the commercial landlord. A document called a deed of assignment, also known as a transfer of lease, needs to be created, with a copy for each of the three parties. As such the three parties each need to sign all three copies. Once it becomes valid all the obligations that you had concerning the commercial premises, pass to the purchaser of your business.