If your business trades from a unit on an industrial estate or a shop on the high street, the lease probably doesn't cross your mind from one month to the next. You pay the rent and get on with it. When you come to sell, it's one of the first documents a buyer's solicitor will read, because a business without a secure home is worth less.
Here's how a lease is dealt with in a share sale and in an asset sale in England, and what changes if you own the building yourself.
Read your lease before a buyer does
Get the lease out early, with any later deeds and side letters. These are the points a buyer's solicitor will check.
- Who the tenant is. The company, or you personally. If you hold the lease in your own name but trade through a company, sort that out before a sale.
- Time left. The end date, any break dates and the next rent review.
- The alienation clause. What it says about assigning the lease, and whether it treats a change in who owns the tenant company as needing consent.
- Repairs. What you must keep in repair, and whether there's a schedule of condition recording the state of the premises when you moved in.
- Renewal rights. Whether the lease is protected by the Landlord and Tenant Act 1954 or was contracted out of it.
- Security. Any personal guarantee you gave, and any rent deposit.
In a share sale, the lease stays where it is
When a buyer buys the shares in your company, the company is still the tenant. Nothing is assigned, so the landlord's consent usually isn't needed. Some leases, though, treat a change in who owns or controls the tenant company as if it were an assignment, and require consent before it happens. If yours does, the sale can't complete without it.
Personal guarantees are the trap. If you guaranteed the company's lease when it was granted, selling your shares doesn't release you. The law releases a guarantor only when the tenant itself is released on an assignment, and in a share sale there isn't one. You could be guaranteeing the rent of a business you no longer own. Ask the landlord to release you as part of the deal, usually in return for a guarantee or a deposit from the buyer. Our guide to share sales and asset sales explains the wider differences between the two.
In an asset sale, the lease is assigned
When your company sells its business and assets, the lease has to be transferred to the buyer. That's an assignment, and business leases usually need the landlord's consent for it.
If the lease says you need the landlord's consent to assign, the law adds that consent can't be unreasonably withheld, though the landlord can ask you to pay its reasonable legal costs. The Landlord and Tenant Act 1988 then sets out what the landlord must do once you've applied in writing. Within a reasonable time, it must give consent unless it's reasonable not to, and tell you its decision in writing. If it attaches conditions, it must say what they are, and if it refuses, it must give its reasons. If the landlord breaches that duty, you can claim damages.
That protection has limits. If the lease bans assignment outright, the landlord can say no. For leases granted since 1 January 1996, the lease can also set out in advance the conditions the landlord may impose, such as a test of the buyer's finances. A landlord relying on those isn't treated as unreasonable. Landlords will usually want the buyer's accounts and references, and may ask for a rent deposit or a guarantor.
Consent is given in a document called a licence to assign, and the sale usually can't complete until it's signed. Make it a condition in your heads of terms, and send the landlord the buyer's details as soon as you can. Landlords work to their own timetable, and our guide to how long a sale takes covers how that affects completion.
Authorised guarantee agreements
For a lease granted on or after 1 January 1996, the Landlord and Tenant (Covenants) Act 1995 releases you from the lease when you assign the whole of it. Older leases work differently, and a tenant who assigns can stay liable for the rest of the term.
The release isn't the end of it. Where the landlord's consent is needed, it can make that consent conditional on you giving an authorised guarantee agreement, often called an AGA. Under it, you guarantee that the buyer will pay the rent and keep to the lease.
- It covers only the buyer you assign to, not anyone they pass the lease on to.
- It ends when the buyer lawfully assigns the lease to someone else.
- If someone guaranteed your company's lease, the landlord may ask them to back your AGA too.
- To claim rent or service charges from a former tenant or guarantor, the landlord must serve notice within six months of the amount falling due.
If your buyer is financially strong, it's worth asking the landlord to accept a deposit or guarantee from the buyer instead of an AGA from you. The RICS code for leasing business premises in England and Wales suggests leases ask for an AGA only where the landlord reasonably requires one.
Rent deposits
A rent deposit is money the landlord holds as security, under a rent deposit deed. The deed should say when it's returned. On an assignment, the landlord often returns yours after checking the premises, and may ask the buyer for a new one. Anything taken from it for unpaid rent or repairs comes off what you get back. The RICS code says deposits should be held in a separate account with any interest going to the tenant, so ask for the interest too. Deal with the deposit in the sale documents, so the money isn't forgotten.
Security of tenure under the 1954 Act
Most business tenants in England and Wales have a right to renew their lease when it ends, under Part 2 of the Landlord and Tenant Act 1954. A protected lease doesn't stop on its end date. It carries on until it's ended in one of the ways the Act allows.
- The landlord can serve a notice, between six and 12 months ahead, saying whether it opposes a new lease. A tenant on a fixed term of more than a year can instead request a new lease, on a similar timetable.
- A landlord can oppose renewal only on grounds set out in the Act. They include serious breaches of the lease, persistent late rent, redevelopment, and the landlord wanting to occupy the premises itself, which it usually can't rely on if it bought its interest in the last five years.
- If the landlord gets the premises back on one of the no-fault grounds, such as redevelopment, the tenant can be entitled to compensation.
Landlord and tenant can agree before the lease is granted that these rights won't apply, known as contracting out. The landlord must serve a prescribed notice first, and the tenant must sign a declaration. A contracted-out lease ends on its end date, and a buyer reads the two kinds very differently. A protected lease with a few years left can usually be renewed, while a contracted-out lease with a few years left is only a few years of certainty.
Dilapidations, in outline
Dilapidations are the repairs and reinstatement a tenant owes at the end of a lease, set by its repairing terms. GOV.UK points out that anything the lease doesn't mention will usually fall to the tenant. The landlord's claim is capped by law at the amount by which the disrepair reduces the value of its interest. If the building is to be demolished, there may be no claim at all. A court protocol sets out how claims should be made, including a schedule of the work, usually sent within 56 days of the lease ending.
In a share sale, the company keeps that liability, so a buyer will look at the state of the premises and may ask for a price reduction or a specific indemnity. In an asset sale, the buyer takes on the repairing obligations going forward. A schedule of condition and recent photographs help either way.
If you own the building
Some owners keep the freehold and let it to the buyer. You keep an income and an asset after the sale, and the buyer needn't find the money for the property.
If the building belongs to the company you're selling, it goes with the shares unless it's moved out first. Moving it can have tax consequences for you and the company, so take advice before you agree heads of terms.
A new lease to the buyer needs a few things settled.
- The rent. The buyer will take a market rent off the profit when valuing the business, so a higher rent usually means a lower price. Our guide to how to value a business explains why.
- Length and breaks. A buyer, and any lender behind them, will want enough years to make the purchase worthwhile.
- Rent reviews. The English Devolution and Community Empowerment Act 2026, passed on 29 April 2026, will stop rent reviews in new business leases from being upwards only. A review will still be able to move the rent up or down with the market or an index, but a term that stops it falling won't work. That part of the Act has no start date yet. It comes into force when the Secretary of State makes regulations, so check the position when the lease is drafted.
- Renewal rights. Whether the buyer gets the protection of the 1954 Act. If it does, getting the building back later will be harder.
- Security. A guarantee or a rent deposit from the buyer. If the business struggles after the sale, you're the landlord left waiting for rent.