When you’re buying or selling a business, it is very easy to focus just on getting the deal completed. However, it is also all too simple to miss some crucial points that may have far-reaching and ongoing implications, making proper due diligence a vital part of a business purchase and proper understanding of the sale agreement a must for the seller.   

Understanding the Business Sale Process 

The process of selling a business involves several critical stages, from initial due diligence to the final transfer of ownership.  

During each stage, it’s vital to closely examine various liabilities associated with the business and its contracts.  

Types of Business Contracts 

1. Employee Contracts 

Employee contracts define the terms of employment between the business and its staff. These agreements cover salaries, benefits, job roles, and termination or severance pay conditions.  

When a business is sold, the new owner inherits these contracts and assumes the responsibilities and obligations therein.  

This includes any ongoing employee disputes, legal issues, or potential liabilities like severance payments or unresolved employment rights issues. 

2. Supplier and Customer Contracts 

Contracts with suppliers and customers outline terms such as delivery schedules, payment terms and penalties for contract breaches.  

These contracts may also encompass aspects like outstanding orders or service level agreements (SLAs). 

The new owner must understand these contracts to maintain business continuity and manage liabilities related to contractual obligations and potential penalties for non-compliance. 

3. Lease Agreements 

If the business does not own its property, there should be a lease setting out the terms on which it occupies, including the lease duration, rent amounts and conditions for lease renewal or termination. 

The buyer will need to make sure that any leases are valid and offer the security needed for the ongoing business and must make sure that it understands all financial and legal obligations associated with the property lease. 

Inherited Liabilities 

When acquiring a business, it’s not just the assets that transfer to the new owner – there’s also the potential inheritance of various debts and legal obligations.  

These liabilities can significantly impact the value and operational scope of the business. Key inherited liabilities include: 

  1. Outstanding Debts: These might include loans, credit agreements, or other financial liabilities that the business has incurred. 
  1. Legal Disputes: Any ongoing legal issues or potential litigation against the business are transferred to the new owner 
  1. Regulatory Compliance: The business may need to comply with industry-specific regulations and standards, which can vary significantly depending on the sector.  
    Understanding the legal aspects of the business sale process is essential for both sellers and buyers. It ensures that a seller can properly prepare the business for sale in order to make the change of ownership as smooth as possible and helps the new owner manage the business post-purchase without dispute or delay. 

Seller Liabilities  

A seller cannot just assume that they walk away from liability when they complete the sale.  The sale contract will inevitably contain obligations to the buyer, such as  

  • Warranties in respect of the business and it’s tax affairs  
  • Indemnities in respect of known issues that come to light during the buyer’s investigations  
  • Post-completion restrictions that will limit what a seller may do for a period after completion (also known as non-competition clauses) 

Unless a seller carefully and fully discloses information about the business and limits its liability as much as possible, there is a risk of claims being made by the buyer after completion.     

Key Considerations and Tips 

  1. Do Your Due Diligence: Before committing to buying or selling, thoroughly understand all the contracts and liabilities. It is wise to get professional advice from solicitors dealing with mergers and acquisitions as well as your accountants 
  1. Negotiate the Terms: In some cases, you might be able to renegotiate the terms of existing contracts as part of the sale process. 
  1. Seek Legal Assistance: Engaging with solicitors specialising in business sales can help you navigate the complexities and ensure you’re fully aware of all liabilities. 

Final Thoughts 

Buying or selling a business is a significant undertaking that requires careful consideration of all liabilities involved. 

Sellers should engage with their solicitors and accountants early on in order to get the business ready for sale.  

Buyers need to have a deep understanding of the business and the liabilities that it comes with. Sellers need to fully understand their potential liability under the sale agreement. 

Specialist solicitors, such as those at Batt Broadbent, can help you conduct buyer or seller due diligence, including identifying liabilities and contracts that need addressing.  

If you’re seeking a mergers and acquisitions solicitor, please give us a call on 01722 411 141. 

Negotiating Leases for Commercial Property 

Negotiating Leases for Commercial Property

The process of leasing a commercial property involves much more than just finding the right location.

One crucial step is negotiating the lease terms. A well-negotiated lease can provide stability, predictability and savings.

Whether you’re a tenant or a landlord, understanding the dynamics and content of the property lease can ensure that the leasing process aligns with your commercial objectives.

Understanding Commercial Property Lease Agreements

A commercial property lease agreement is a legally binding contract between a landlord and a tenant. It dictates terms under which the tenant can use the commercial property for business purposes. The same basic principles will apply regardless of the size and location of the property, be it a retail shop, office space or warehouse.

Here are some of the most important points to consider when negotiating a new lease:

Expectations from the Negotiation Process

  1. How much Rent will be payable: A starting point would be to try and find out how much rent is being paid for similar properties in the area to make sure that you are not paying over the odds.
  2. How much will the rent increase by? As well as the starting rent, make sure that you are happy with how the rent will increase over the term of the lease. How often will the rent increase and on what basis? There may be a market rent review or a review that is linked to turnover or CPI/RPI
  3. Lease Duration & Renewal: Decide the length of the lease. Short-term leases offer more flexibility, but long-term leases might provide stability and potentially better terms, and may be cheaper overall. Will the tenant have the right to renew the lease at the end of the initial term?
  4. Maintenance and Repairs: Determine who will be responsible for maintenance, repairs, and any associated costs. This includes common areas and structural elements of the building. The tenant will need to be clear on what condition the property will need to be returned at the end of the lease
  5. Break Clauses: A break clause allows either party (but often just the tenant) to terminate the lease early, providing a safety net in uncertain circumstances.
  6. Assignment and Subletting: Understand the tenant’s rights regarding subletting space or transferring the lease to another party. Will consents be required and will there be any restrictions?
  7. Permitted Use: Clearly define the permitted uses of the property to ensure your business operations are not restricted. This is defined by the Use Class Order, which must tally with what the occupier intends to do (although it may still be necessary to obtain planning permission for the proposed use)
  8. Insurance Discuss who will bear the cost of insurance and the extent of coverage required. Usually, the landlord will insure and recover the cost from the tenant.
  9. Fit-Out Works: Fitting out a building with equipment, hardware, and other work required for the new business may present an opportunity to negotiate a short rent-free period while the works take place. The landlord may also agree to contribute to the cost. A tenant will want assurance that they will be able to carry out required works before they commit to a lease.

After negotiating on key terms, the agent will draw up a “Heads of Terms,” which will set out the main content of the lease. While this isn’t strictly legally binding, it’s important to not sign anything until both parties are happy to proceed.

Tips for Successful Lease Negotiations

  1. Do Your Research: Before entering negotiations, research comparable rates and lease conditions in the vicinity.
  2. Seek Legal Advice: Always consult with a solicitor experienced in commercial property leases. They can identify potential pitfalls, ensuring that your interests are protected. Appointing a specialist solicitor is absolutely essential.
  3. Prioritise Your Needs: Understand what’s essential for your business. Whether it’s location, space, or rent flexibility, be clear about your priorities.
  4. Be Ready to Walk Away: Sometimes, the best negotiation strategy is to be prepared to find another property if the terms don’t align with your needs.
  5. Document Everything: Ensure all negotiated terms are explicitly mentioned in the lease agreement to avoid future disputes.


Negotiating a commercial property lease can be complex and should not be rushed. A well-negotiated lease fosters a strong foundation for a long and fruitful business relationship.

By doing your research, prioritising your needs, and seeking professional guidance, you will be taking an important step towards making sure that the commercial property/lease serves as an asset, not a burden.

Batt Broadbent offer property lease advice and guidance, including assisting with commercial property leases. Contact us here to find out how we can help you.

Peter Warr and his team have relocated to 2 New Road, Chippenham, Wiltshire, SN15 1EJ.

We also have a new telephone number – 01249 472 444.

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