Question re tenant selling leasehold

crest133 said:

I can see your point of view Scott. However, where this might not suit you is if you sold a tenanted investment commercial property where you're the landlord and the new purchasing lessor wants to hold you over as guarantor until the end of the current 5 year lease in case the investment doesn't perform as well as you said.
Cheers
crest133

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The owner of the building doesn't put the obligation that they provide any guarantee over the tenant to a buyer of the premises, that is the purchaser's risk in due diligence. The vendor's obligation is simply to procure new guarantees from the tenant in favour of the purchaser/transfer any bond held on the building. That is not the assignment of lease but a transfer of title and all lesser titles and restrictions on the land. The matter that you've raised would be in the conditions of contract if that's what the freehold buyers negotiate such a clause ie a rent guarantee.

The op owns the building and his tenant is assigning the leasehold not the freehold. ie your second point.

Thanks Scott & Handy Andy.
Are you guys saying that as a landlord of the building or premises, you could somehow block a tenant from selling his business to a buyer ?
Cheers
crest133

If the Lessor does not approve the buyer of the business ie based on the terms of the lease (not just under the assignment provisions), it is possible to reject the prospective tenant or under such terms that can be held not to be unreasonable (if the term 'consent not to be unreasonably withheld' applies).

What is 'reasonable'/'unreasonable' is a matter for debate however as a lessor you don't want to be put into a weaker position with a new tenant than you would have otherwise had if the lessee was not assigning their lease.

crest133 said:

Thanks Scott & Handy Andy.
Are you guys saying that as a landlord of the building or premises, you could somehow block a tenant from selling his business to a buyer ?
Cheers
crest133

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Sort answer is yes and it happens all the time.

You often reject potential purchasers as their financial positions, experience and ability to trade are not similar to that of the existing tenant.

The existing tenant then has the option to take the sale but be named as guarantor for the new lessee.

More often than not, they do not proceed with the sale.

Those that day are named as guarantor and are issued the same correspondence that is legally required.

At the end of the day, an owner must ensure that the strongest possible tenant is in their property and that like with like is maintained.