A lease can sit quietly in the background for years while you operate a business. Rent gets paid, the office continues operating and there may be little reason to think about the document itself. When the business is sold, however, the lease can suddenly become an important part of the transaction.
A buyer may want to know whether they can continue operating from the same premises after settlement. How much time remains on the lease? Are there options to extend it? What are the rent and outgoings? Is the location important to the client base? What needs to happen for the purchaser to take over the premises?
The importance of those questions will depend heavily on the business. A highly digital professional-services firm serving clients across Australia may be able to move relatively easily. A suburban accounting practice with a long-established local client base may place much greater importance on remaining in the same office.
The remaining term can matter as well. A buyer may be uncomfortable acquiring a business that depends heavily on its location if there is very little certainty about whether the premises will remain available. On the other hand, a very long lease with significant ongoing costs may not suit every purchaser either. There is no automatic rule that a longer lease is always better.
Landlord involvement can also affect timing. Depending on the existing agreement and how the sale is structured, the purchaser may need approval to take over the lease or may need to negotiate a new arrangement. These conversations can take time, particularly if additional information about the buyer is required.
Premises can be even more important where substantial money has been spent on fitout, signage or location-specific infrastructure. A buyer may want confidence that they will be able to continue using those assets rather than face an unexpected move shortly after purchasing the business.
Before going to market, understand the commercial position of your lease. Know the remaining term, available options, current costs and anything that could complicate a transfer. The detailed legal position should be reviewed with your solicitor. A lease issue identified early can usually be managed as part of the process. The same issue discovered immediately before settlement can become a significant delay.
If you want to know more feel free to reach out. Contact us for personalised assistance and expert guidance.
Regards,
Tony Arena