One of the most important aspects when buying a business is to ensure that the premises from which it operates is secured going forward.
The first consideration is to ascertain if there is a lease relevant to the premises and what are the terms of that lease.
Generally, the purchaser will seek to have the lease assigned from the seller or may want to negotiate a new lease with the landlord.
It is important the business contract incorporates the lease obligations and how they are to be treated.
There is a lease – What next?
Once you have established there is a lease in place it is important to review the terms and conditions of that lease.
- Identify the actual premises
- Has the lease been validly executed and what terms are there in place to assign it?
- The names of the parties to the lease
- The term of the lease and are there any options to extend
- What is the rental/lease payments, how are they calculated and how are they increased?
- Is the premises suitable for the nature of business to be operated from it and does it have all the relevant regulatory approvals?
- What are the terms of the security such as a security deposit, bank guarantee or personal guarantees?
- How are the outgoings dealt with including insurances?
- Can you sublet the premises?
- What costs are you going to be up for when you leave by way of refurbishment, redecoration, rectification or reinstatement?
- Does the lease have to be registered?
- Who pays the legal costs for the preparation of the lease and any subsequent assignment?
Have an expert review the lease
When you are dealing with a lease as part of a business sale, whether by assignment or, negotiating a new lease, you need to know your legal rights.
It can be easy to overlook the assignment or negotiation of a new lease when purchasing a business.
A lawyer experienced in this area will be able to review the lease and negotiate with the landlord and their legal advisors on your behalf.
It is vital to get your landlords consent and this will require the execution of a Deed of Assignment. Generally, that cannot be unreasonably withheld.
Each state in Australia has different legislation relating to the assignment of a lease.
For example, in Queensland you cannot unreasonably refuse the assignment of a lease. However, section 50(2) of the Retail Shop Leases Act 1994 states that the landlord must not impose a condition which the existing tenant finds unreasonable or look to impose new conditions on the proposed assignee.
In New South Wales, a landlord can refuse the assignment if the assignee proposes changes to the shop’s current use, the assignee has financial resources or retailing skills that are inferior to those of the existing tenant or the tenant has failed to comply with the correct procedure for obtaining consent to the assignment.
How can FC Lawyers help you with buying a business?
Our expert business and property lawyers have over 100 years combined experience in lease related matters, and with a particular expertise in the negotiation and assignment of a lease.
We have acted for both landlords and tenants in the process and are happy to discuss your needs leasing needs when buying a business.
Contact our experienced business and commercial team today.
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