One day, when you are a huge success, you may want to retire to the Caribbean and sell your flourishing business to someone else. That someone else will probably be a trading company with a bigger business than yours, who wants to absorb your business into theirs. It is unlikely to be an individual.
You will be aware that when the time comes, and you need to assign the lease to the buyer company, the landlord’s consent is required. But you probably quite reasonably assume that the landlord has to give consent unless there is an obvious reason not to.
If you are selling to a decent trading company, you’re probably right – the landlord wouldn’t have any grounds to hold up your sale.
But – unless you’ve been careful – the landlord may have the right to impose a condition which will actually make the sale impossible in practical terms.
The problem comes from the clauses about assignment in the lease, which set out the conditions which the landlords are entitled to require to be met before they must give their consent. Traditionally, a typical condition has been that any company taking over the lease must produce two directors as personal guarantors.
There was a time when people shrugged their shoulders and gave guarantees for leases, because that’s what people did. But in the recessionary times in the early years of the century, so many people found themselves on the hook for companies which had gone bankrupt – unfortunate people who lost their houses over it – that it became anathema to sensible business people to ever give personal guarantees.
So, if you are trying to sell to a company, and the landlords are digging their heels in and insisting on personal guarantees from directors, the buying company may simply be unable to do the deal.
To avoid this risk, you need to make sure that your solicitors go through the assignment clause and delete any reference to incoming tenant companies having to provide personal guarantees from directors or anyone else.
The appropriate and proportionate protection for landlords is usually to obtain a rent deposit from the incoming tenant.