Whenever a business owner is about to sell their business, the wishes of the purchaser have to be taken into account with regard to the Lease over the business premises. The current Lease may be for a long period with, say, three years left on a five year term with an option for a further five years. In such a case, the purchaser may be willing to take a transfer of that Lease.
However, the situation may arise where the Lease is to end in, say, 12 months and the purchaser wants a longer term. One possibility is for the lessor to grant a new Lease to the purchaser for, say, 5 years with a 5 year option giving the purchaser the security of a full 10 years.
A further possibility is for a Variation of Lease to be entered into extending the term of the current Lease by a further 4 years and preserving the 5 year option to achieve the same effect. Although this may save on the legal costs of preparing a new Lease, the lessor, as a condition of the transfer of the Lease, may wish to still hold the outgoing business owner/lessee for any liability under the Lease.
Care needs to be taken to ensure that a business owner considers their own best interests and not just those of the purchaser.
October 2021