Selling A Business With A Lease

Selling a business with a lease can be an attractive opportunity for potential buyers, as they can step into the premises and continue trading. When you sell a business with a lease, you can transfer the lease to your buyer, provided the landlord agrees. Doing so makes the transition smoother for your new buyer and saves you money, as you will not need to continue paying the lease once you have sold your business. You have several factors to consider when selling a business with a lease, outlined below.

What does selling a business with a lease mean?

Selling a business with a lease involves selling your business with a lease in place and transferring the existing lease agreement for the property the business operates from to the new buyer. The new buyer will take over the responsibility of the lease, but they will need consent from the landlord. A process called the assignment of the lease must be completed when the new buyer is approved by the landlord, allowing them to step into the business without worrying about the lease.

After you have sold your business, the new buyer becomes the tenant, taking over all terms and conditions of the existing lease as they stand in the rental commitments.

Is there capital gains tax on the sale of a business with a lease?

When you sell a business with a lease, you might be required to pay capital gains tax (CGT). The CGT is usually only applied to the sale of the business that you own, rather than the rent premium you rent from a landlord.

There are some exemptions to paying capital gains tax when you sell your business, but each of these exemptions has strict requirements that you must meet to qualify for them. Make sure that you check these requirements carefully to see if you are exempt from paying capital gains tax on the sale of your business.

What are the tax implications when selling a business with a lease?

When selling a business with a lease, you may need to pay capital gains tax and goods and service tax. How much you pay for these taxes and whether you are entitled to any relief will vary depending on the sale of your business, if the lease is transferring, and whether you have sold your business for a profit or a loss.

It is difficult to provide specific information or guidance as everyone’s tax situation is unique. You can learn more about your tax implications by speaking to the Australian Taxation Office (ATO) or seeking help from an accountant.

What are the benefits of selling a business with a lease?

Selling a business with a lease has several benefits, including honouring your lease agreement and providing the new buyer with a premise for their business to continue trading. We have outlined the major benefits of selling a business with a lease below:

The new owner does not need to find another premises

A major benefit is that the new business owner will not need to find other premises, allowing them to start trading immediately. They also won’t need to worry about the additional cost of funding premises for their new business or informing customers and clients of a new address. Keeping the same premises can ensure that the new business owner does not lose any trade during the initial takeover and reduces the chances of them asking for a cost reduction to cover the cost of finding new premises.

You do not need to continue paying the lease

Many lease agreements will have a clause in place that requires you to continue paying your lease until the expiry date, even when your business has moved from the premises. Others will include a fee for breaking your lease agreement and leaving the premises early, leaving you with more outgoings. However, when someone takes over your lease agreement, you won’t be liable for any more payments, making this a more affordable option for businesses with lease agreements.

What legal considerations do I need to make when selling my business with a lease?

There are a few legal considerations that you need to make when selling your business with a lease, including securing consent from your landlord and any legal fees or costs. We have outlined the main legal considerations you should make below:

Assigning your lease

Before your business has sold, it is best to speak to your landlord and get consent for your lease to be transferred to the new business owner. It is best to do this before your business is sold to avoid any issues down the line if your landlord does not consent to the lease being transferred.

Your landlord will also need to approve your new buyer and confirm that they can be transferred to the lease. You will need to gain consent from your landlord before the lease can be signed, so you must consider the possibility of it being rejected. Your landlord cannot unreasonably withhold consent, but you might encounter issues if the buyer does not have the same professional experience as you or does not have the same or better financial security.

Assignment legal fees

You also need to consider the costs associated with the legal assignment. As the seller, you are responsible for any legal fees associated with transferring the lease to the new buyer. You will need to ensure that you have the budget for these to avoid any delays when transferring the lease for your business.

How to value a business being sold with a lease

The best way to value a business being sold with a lease is to contact a business valuer. They will be able to assess not only the value of the business but also the included lease to offer an accurate price for your business. A business valuer can also offer guidance on how to increase the value of your business by extending your lease to give the new owners longer or asking your landlord to make certain adjustments.

How do I sell my business with a lease?

To sell your business with a lease, you will need to do the following:

• Get written consent from your landlord to sell your business with the lease
• Check your lease and ask for an extension or any adjustments to make it more attractive for potential buyers
• Provide your landlord with information about the new buyer, including their financial situation
• Once your landlord agrees with the new leaseholder, a deed of assignment is signed, transferring the lease to the new owner

Get in touch with a business valuation expert near you

Selling a business with a lease can seem confusing and daunting. at first, but with the help of a business valuer and broker, you can find the perfect buyer to take over your lease and continue with the success of your business.

We have business valuation experts across Australia, and you can get in touch with them by following the details below:

• Get in touch with our business valuation experts in Brisbane
• Get in touch with our business valuation experts in Sydney
• Get in touch with our business valuation experts in Melbourne
• Get in touch with our business valuation experts in Perth
• Get in touch with our business valuation experts in Adelaide
• Get in touch with our business valuation experts on the Gold Coast
• Get in touch with our business valuation experts on the Sunshine Coast