In our first post we focussed on the question 'What are you buying?'
In this, our second post of our four part series explaining some of the key legal implications of Buying a Business, we cover Buying Freeholds and Leasing...
If you are buying a lease, is the landlord the seller?
If not, you will be dealing with two parties during the transaction so you need to make contact with the landlord (or their solicitor) as well.
If you are buying an existing lease, what are the terms of that lease?
- How much rent will you pay?
- Is VAT payable on the rent?
- When is the next rent review?
- What are your repairing obligations?
- How long is left of the lease term?
Consider what implications these obligations will have on your budget.
Do you have the right to a new lease at the end of the contractual term or has the right been excluded?
(These are often referred to as Landlord and Tenant Act 1954 rights.)
If it has been excluded, you won be entitled to a new lease so the landlord may ask you to leave. Does he purchase price take this into account? If location is key, this will be far more important to you.
Think about what you are actually buying, especially if the lease ends in a couple of years are you mainly paying x for the fixtures and fittings rather than the property?
At the end of the term, you will have to give the property back to the landlord in the condition specified in the lease (e.g. good repair). If the term ends in a couple of years, you should be considering carefully how much it would cost to put the property in the state required to hand it back. Depending on the tenant obligations in the lease, you may be responsible for repairing/replacing rotten window frames and the roof can you afford this? Can you do a deal with the landlord or the outgoing tenant abouthat is required?
Are there any other breaches of the lease which will cost money to remedy?
If so, can these be resolved by the seller before you complete or will they agree to a reduction in the price to deal with them?
Have you considered asking the landlord for a new lease from the date of purchase?
This may delay the transaction but will give you more security and can get you out of having to repair those items which the current tenant hasn't done (it may cost you more however as you will probably have to pay something towards the landlord legal costs).
Do you intend to carry out any alterations?
If these are important to your business plans, you should get approval before you sign up in case the landlord decides not to let you do them.
Emsleys Solicitors Commercial team can help with all aspects of selling or buying a business. Contact Angela Macready on 0113 201 4900 for a free initial consultation and no obligation quote.
Take a look at our third part in our Buying a Business series discussing contracts.Back to Blog