Yes, a leasehold business can be sold. A leasehold business is a business with a lease agreement in place for a property which is used for the purposes of the business. Selling a business with a property on lease involves transferring the lease to the new owner once the business has sold. However, you must comply with the terms and conditions set in your tenancy agreement to get consent from your landlord and respect any restrictions set out in your agreement.
What to expect when you sell a leasehold business
When you sell a leasehold business, the average time it can take is around 10 – 12 weeks and you will need to make sure the whole process is handled in an orderly manner to ensure there are no objections from the landlord. You may have some guidance in your tenancy agreement on the terms in which you can assign a business lease agreement to a new tenant, and this should also provide a breakdown of what conditions must be met to gain consent from your landlord.
Some landlords specify special terms in the agreement such as restrictions, minimum notice period, methods of communication, and any fees involved in assigning the lease. The landlords consent may be subjected to due diligence checks on the new tenant. This usually includes a credit and background check, references, and details of any changes in the use of the property.
When you sell a leasehold business, the lease for the property will be transferred to the new owner upon completion of the business sale. You will most likely be required to sign an agreement which is known as an Authorised Guarantee Agreement. This agreement binds you to meet the obligations of the new tenant should they fail to uphold the agreement.
Landlords consent
Obtaining your landlords consent should not be considered a simple matter and failing to do so can lead to severe financial penalties. Consent should always be obtained in a formal document and is recommended to get any advice from a solicitor before proceeding. The application for consent should usually be sent to the landlord or their agent. The tenant will be liable for any costs whether the application is approved or not. You may be expected to provide further information or documents regarding the potential new tenant, in order for the landlord to come to a decision.
Alternative options to selling a leasehold business
- Selling the business without leased property: If the lease is due to end on the property you may decide not to renew the lease if it makes it easier to sell the business without the property element.
- Terminating the lease: If the buyer wishes to purchase the business without the lease property, you can look to end the lease early which may incur a break fee.
- Subleasing the commercial property: Subleasing is when the original tenant rents the property out to a subtenant. This route may be taken if the seller wishes to retain ownership over the property until full payment is received from the buyer.
