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5 Essential Lease Agreement Considerations for Selling Your Business

Commercial lease agreement considerations

Selling a business involves more than just transferring ownership of assets and liabilities; it often requires careful negotiation and planning, especially when it comes to the lease agreement for the business premises. The terms of your lease can significantly impact the sale process and the future success of the business under new ownership. In this blog post, we'll explore some key considerations to keep in mind regarding your lease agreement when selling your business.

  1. Transferability Clause: One of the most critical aspects of your lease agreement is the transferability clause. This clause specifies whether the lease can be transferred to a new owner in the event of a sale. Ideally, you should negotiate a lease agreement with a clear and favorable transferability clause, allowing for the smooth transition of the lease to the buyer without any disruptions to the business operations.

  2. Remaining Lease Term: The remaining term of your lease is another crucial factor to consider. Buyers will want assurance that they have sufficient time to recoup their investment and make improvements to the business. If your lease is nearing expiration, it may be challenging to find a buyer willing to take on the risk of negotiating a new lease or relocating the business. Aim to negotiate a lease agreement with a favorable term that provides stability and security for both the seller and the buyer.

  3. Renewal Options: Including renewal options in your lease agreement can provide added flexibility and security for the buyer. These options allow the buyer to extend the lease beyond the initial term, providing assurance of continued occupancy and stability for the business. Negotiate renewal options with favorable terms, such as fixed rental rates or minimal rent increases, to incentivize the buyer to exercise their option and commit to the long-term success of the business.

  4. Assignment and Subletting: Consider the flexibility provided by the assignment and subletting provisions in your lease agreement. These clauses determine whether the buyer has the ability to assign the lease to another party or sublet the premises to mitigate any unforeseen circumstances or changes in business needs. Negotiate these provisions to ensure that the buyer has the freedom to make necessary adjustments to the lease arrangement while protecting the interests of the landlord and maintaining the stability of the business.

  5. Landlord Consent and Approval: Keep in mind that most lease agreements require landlord consent for any assignment or transfer of the lease. As such, it's essential to establish open communication with your landlord early in the sale process and obtain their approval for the transfer of the lease to the buyer. Work collaboratively with your landlord to address any concerns and ensure a smooth transition of the lease agreement to the new owner.

The lease agreement plays a pivotal role in the sale of your business and should be carefully negotiated to protect the interests of both the seller and the buyer. By considering factors such as transferability, remaining lease term, renewal options, assignment and subletting provisions, and landlord consent, you can ensure a seamless transition of the lease and set the stage for the continued success of the business under new ownership.


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