FAQs

Leasehold Businesses

I am buying a business and the Lease only has 3 years left to run - what happens then?

Any tenant who has complied with his lease has a right of renewal unless:

• The landlord can show that he intends to redevelop; or
• The landlord offers suitable alternative accommodation
• The lease takes away the renewal rights

The rent under the Lease is due for review next year - is there any cap on the amount of increase?

Yes the cap in most rent review clauses is the market rate at the time. This is not expressed in percentage terms but is a level of protection for all tenants against landlords attempting to act unreasonably.

I need the Landlord's permission to sell the Lease and business - what is to stop the Landlord being awkward?

The lease will normally state that the landlord cannot unreasonably withhold consent. The landlord will ask for references on the buyer and may ask for a rent deposit.

Staff

I am buying a business and it has 5 staff - how will I know they won't all leave as soon as I take over?

As a matter of law the contracts transfer on completion but the employees are free to give notice to leave under their contracts of employment. The best advice is to check with the seller if anyone gives notice before completion.

None of the staff have written contracts - does this mean they don't have any rights as employees?

All employees have statutory rights and terms are implied into their contracts by statute and common law. They also have a right to written terms of employment so get them done as soon as possible.

What paid holidays are the staff due?

Employees are due four normal weeks paid holiday including bank holidays - so a part timer working three days a week gets four three day weeks off.

I am buying a business - what about the contracts?

After I take over the business will I have to keep buying from the same suppliers?

Not unless you agree to do so.

What happens if suppliers refuse to supply me?

If there is no requirement to continue to supply pursuant to a supply agreement, then you will need to source new suppliers.

Do I have to supply existing customers at discounts previously agreed?

This will depend on what you agree with the seller who may have agreements already in place.

Do I have to keep equipment the seller has on lease?

You are free to negotiate with the sellers on what you will or will not take over at completion. Most buyers do not agree to take on assets that are subject to lease hire contracts unless they are assets which are vital to the smooth running of the business.

What about the use of the name - can I stop the seller using the same name?

The goodwill you are purchasing will include the business name, the sellers will agree to assign the use of the name as part of the sale and as such they will be restricted from using the same or a similar name following completion.

So what will the legal services cost then?

This will vary according to the solicitors you use - expect to pay at least £1,200 plus vat for the legal work and you might also have to budget for stamp duty, land registry fees, and search fees. It is more important to choose the right professional than to save a few pounds.

Proceed with cautious enthusiasm

These notes are prepared by the company and commercial department of HilliersHRW Solicitors as general guidance and cannot be taken as legal advice. HilliersHRW Solicitors will not be liable for any loss, direct or consequential, suffered by anyone acting or omitting to act as a result of the contents of these notes. HilliersHRW Solicitors will be happy to give you legal advice on any of the above points. Our business sale and purchase experts are Martin Addrison, Kirsten Rimmer and Simon Moffat who can be reached on 01438 346 026.