When you sell a retail business, if the business is subject to the transfer of the lease, you will also need to assign or transfer the lease to the purchaser of your business (proposed tenant). In effect, the purchaser of the business buys the business and takes over your obligations under the lease.
A landlord will require that the lessee provide it with such information as the lessor may reasonably require to be satisfied that the financial resources and retailing skills of the proposed tenant are not inferior to those of the current tenant.
So when selling your business in addition to preparing the sale contract, you will need documentation prepared to assist in the transfer or assignment of the lease to the purchaser.
To have the lease transferred, you as Vendor should
1. get an updated Lessor disclosure Statement from your Landlord.
2. Give the Lessor’s Disclosure Statement to the proposed tenant.
3. Ask the proposed tenant to provide the following information:
- Name and contact details of proposed tenant
- Financial documents to show the business experience of the proposed tenant
- financial documents supporting the financial standing and financial resources of proposed tenant
Note: The proposed tenant should have similar or more retail experience and financial resources than the exiting tenant.
4. Provide the proposed tenants information to the Landlord to allow the Landlord to consider the request to transfer the lease.
5. Provide a copy of the Assignors Disclosure Statement to the proposed tenant
6. Formally request Landlord’s consent to the transfer of the lease to the proposed tenant and provide to the Landlord the Assignors Disclosure statement.
It is often that a Landlord will want the parties to enter into a Deed of Assignment of Lease confirming the agreement to transfer the lease. This is usually a tri-partite agreement between the Landlord, the outgoing tenant and the incoming tenant and confirms the obligations of each party as to the transfer of the lease.
If you require any further information in relation to retail lease, please contact our team of lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.