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Selling a business during the term of a lease - Ross Barristers Professional Corporation

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Selling a business during the term of a lease

in Commercial Practice by admin / February 18,2014

When selling a business during the term of a lease, as a condition of consenting to the assignment of the lease, the landlord will generally require you to sign a guarantee or indemnity for any breach of the lease that occurs after the sale. As a business owner, you are handcuffed by the condition set by the landlord. You have to sign the indemnity. These can be very dangerous. Depending on the scope of the indemnity, your responsibility could continue should the business be sold again and/or should the lease be extended or renewed.

It is important that you negotiate a reasonable period for an indemnity for example the end of the current lease. It is also important that you be satisfied that the next operator will be able to run the business so as to meet its rent obligations. Otherwise, it is critical that this risk factor be considered in the sale price and perhaps even the decision of whether or not to sell.