Commercial & Business Law

I have sold my business, what happens next?

The process can vary from transaction to transaction but usually follows the outline below:

1. You need to gather together all the documents you have relating to the business - contracts of employment, contracts with suppliers and customers, accounts, etc - and pass these to your solicitor.

2. Talk to your accountant or tax adviser about the correct apportionment of sale price between goodwill, fixtures and fittings, and premises.

3. Obtain the consent of your landlord and any other persons whose consent is required. Generally your landlord will want to see references (normally one bank and two trade references) for the buyer of your business.

4. Your solicitor will then prepare the draft contract tailored to suit you and send it, with replies to standard enquiries and title deeds or lease, to the buyer of your business (the contract package).

5. The solicitor for the buyer of your business will then look through the contract package and raise enquiries on it.

6. The terms of the contract will be negotiated and the formal consent from the landlord or any other third party (such as a licensing authority) obtained where necessary.

7. Completion of transaction including transfer of business premises and assignment of goodwill together with valuation of stock will then take place.

I've not bought a business before, how long does it take?

Buying a business starts with arranging an appointment to view your chosen business. Once you have met the sellers and hopefully had a chance to look at the latest profit and loss account information, you will be ready to put in your offer for the business.

Once your offer has been accepted, you should allow six to eight weeks for both sides' solicitors to agree the draft Sale and Purchase Contract details. You should also finalise your funding arrangements during this time. If it is a leasehold business, this period is also used to gather references for and obtain the consent of the landlord.

Once both sides are in agreement, all enquiries have been answered and the landlord has given his consent, the business purchase can then move to an Exchange of Contracts and Completion.

What is the difference between purchasing a business Freehold or Leasehold?

In effect, if you purchase the Freehold as well as the fixtures and fittings and goodwill of the business, then you will own the property as well as the business. If you purchase Leasehold, you will own the business and fixtures and fittings and will have the right to occupy the business premises for an agreed rent.

What does SAV mean?

SAV means Stock at Valuation.

Most businesses sell a product and, to enable their customers to have a choice, they hold a certain amount of stock. When you buy a business, this stock is not usually included in the asking price for the business. When you buy the business, you may need the stock to carry on trading.

So the value (cost price) of the stock is calculated and paid for when you take over the business.

I've found the business I want to buy, but my bank has turned me down for a loan. What can I do?

Whilst we do not arrange finance ourselves, we would be happy to put you in touch with someone who may be able to put together a financial package when other lenders have failed.

My lease is up for renewal soon, what should I do?

Call us immediately to find out what your rights under the lease are as they depend on the type of lease you have.

In most cases, the law gives you a general right to a new lease and, in most cases, landlords are happy for tenants to renew their leases, provided the rent is increased to market level. Assuming that your landlord is happy for you to stay, he or she will serve you with a Section 25 Notice setting out their proposals for the renewal of the lease. There are things you can do to pre-empt this if you do not wish to wait and see.

However, the Section 25 Notice has the effect of legally ending your lease and legal steps need to be taken to protect you once you receive the notice.

It is therefore very important that you contact us as soon as you receive a Section 25 Notice from your landlord otherwise you may lose your legal rights.

If you lose your legal rights, the landlord could charge whatever rent he or she wants and could even make you leave the premises. Obviously, this could have a critical effect on your business.

My lease is up for renewal, what if I do not want to stay?

Even if you do not want a new lease, you may still have to go through a legal procedure, otherwise you may have to keep paying rent.

My lease has expired and I think my landlord wants me to leave. What do I do?

Contact us immediately. In most cases you will have a general right to stay, but your landlord can object on certain limited grounds.

If your landlord does think he or she has valid grounds for objection, he or she will serve a Section 25 Notice, but, instead of setting out his or her proposed terms, he or she will state the grounds under which he or she is objecting.

Even if your landlord proves his or her grounds, you may be entitled to compensation. It is therefore very important that you take action immediately. Leaving it too late could mean you lose all your rights, including the right to compensation.

My landlord wants to increase my rent, can they?

Generally a lease gives the right for landlords to have the rent reviewed periodically and, obviously, the landlord will be looking for an increase. Usually the landlord will suggest a new rent either directly or through a surveyor or agent and then it is up to you to try and agree the new rent with the landlord.

There should be provisions in your lease stating what will happen if agreement cannot be reached. We would be happy to advise you on the specific terms of your lease.

My tenant is not paying his rent, what can I do?

Before you talk to your tenant, you should seek legal advice immediately. Not all remedies are available to every landlord and you should call us to talk about what remedies are available to you.

Briefly, the remedies available to a landlord if the tenant breaches payment of rent covenants are:

1. Commercial Rent Arrears Recovery (CRAR).

2. Forfeiture.

3. Debt Action.

4. Bankruptcy or Winding-up.

5. Pursue a former tenant, a guarantor or surety.

And the following factors should be taken into consideration when deciding which remedy to pursue:

• How much rent is outstanding and how long it has been in arrears?

• Can the defaulting tenant pay?

• If it is an old lease, is the original tenant under a continuing liability and/or did any previous assignees give the landlord direct covenants?

• If it is a new lease, is there an Authorised Guarantee Agreement (AGA) in existence?

• What are the consequences of pursuing third parties?

• What does the Lease state (eg for forfeiture to operate there must be an express clause allowing for the same, or that particular remedy cannot be used)?

Call us for advice tailored to your lease and circumstances.

What things should I consider when buying a buy to let property?

Some of the main things to consider when buying property to let are:-

• What sort of tenant do you want and what sort of properties will they want to rent? Consider both location and type of property your tenant will want to rent, eg students like to be near universities, young professionals need good transport links and may prefer newer, low maintenance housing.

• Research - be prepared to shop around to find the right buy to let mortgage for you, find out the average rents for the area you are considering buying properties in, as most buy to let lenders want rent to cover 125% of mortgage repayments. Even properties in popular areas can stand empty, so factor in two months without rent.

• New legislation relating to payment and retention of deposits may affect your ability to obtain possession of the property.

• How will you deal with and budget for maintenance and repairs? Letting agents will charge a management fee, but will have access to a network of reputable plumbers, electricians, gas applicance installers and decorators, and will deal with any problems. All electrical and gas applicances have to be regularly inspected and any furniture you provide will be subject to safety regulations.

• How will you attract tenants? Letting agents will advertise your property, may have a list of tenants waiting for the type of property you are letting and will arrange viewings. To protect your property and income, you need to vet potential tenants and letting agents already have procedures to do this.