When a business is being sold, one of the important steps is to negotiate and execute an agreement of purchase and sale. The agreement outlines the terms and conditions of the sale and purchase of the business, including the transfer of assets, liabilities, and leases. When the business is located in leased premises, the agreement of purchase and sale must be carefully reviewed and structured to account for the leasehold interest.

Leases are contracts between a landlord and a tenant for the use and occupancy of a property. A lease often includes provisions that restrict the tenant’s ability to transfer or assign the lease without the landlord’s consent. When a leased premises business is being sold, the lease must be reviewed to determine whether the landlord’s consent is required and if there are any restrictions on the transfer of the lease.

Assuming the landlord’s consent is obtained, the agreement of purchase and sale must reflect the transfer of the lease. The buyer must become the new tenant under the lease and assume all of the tenant’s obligations under the lease. The lease must be assigned to the buyer, and the seller must be released from any further obligations under the lease.

The agreement of purchase and sale should include provisions that address the transfer of the lease, such as representations and warranties that the lease is in good standing, and that no default has occurred. The agreement should also include provisions that require the landlord to provide consents and execute documents to effect the transfer of the lease.

Finally, the agreement should address any lease-related costs, such as transfer fees, security deposits, and other charges. The buyer and seller should agree on who will pay these costs and how they will be allocated between the parties.

In conclusion, when a business is being sold, the agreement of purchase and sale must account for the leasehold interest if the business is located in leased premises. The lease must be carefully reviewed and structured, and the agreement should include provisions that address the transfer of the lease, representations and warranties, and costs. By doing so, both the buyer and seller can ensure a smooth transaction that minimizes any risk of future disputes.