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What is the proper procedure to sell a business?

Discussion in 'Legal Issues' started by kennyboi, 21st Apr, 2016.

  1. kennyboi

    kennyboi Well-Known Member

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    Hi,

    My relative is selling their restaurant business and a buyer is interested.

    The buyer demand that they transfer their business lease to their name first before they sign the business sale contract and pay the deposit.

    My relative's solicitor just relay the buyer demand back to them and ask them will they do it, with no legal opinion of their own.

    It doesn't sound right to me, but I am not sure if I am right. If they transfer their lease and they backed out from the deal, what legal recourse do they have to get the lease back without a signed contract / deposit?
     
  2. Nick Valsamis

    Nick Valsamis Well-Known Member

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    It sounds way too shifty. If they do that before anything is signed and paid for, then the buyers will have leverage to renegotiate the price.
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    Signed contracts and deposit (so it is enforceable). Transfer nothing until fully paid. Doesn't sound like the solicitor knows a great deal in this instance - where's @Terry_w ?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes that is not right. Once they have the lease they basically have the business. Need to enter a contract of sale first, perhaps subject to the lease being transferred.
     
  5. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Edit, just saw Terry mention this in post above.

    What if the lease is not transferred, business sale goes through, then the landlord is not willing to take on the new owner?
    I believe the landlord does not have to agree to a new tenant/business owner, is this correct?
     
    York likes this.
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I think a landlord can not reasonable without consent to transfer a lease. but if they new owner is in a less favourable financial position they may be able to refuse.

    I did a transfer ages ago where the landlord refused and would only consent if the original leassor guaranteed the new business owners lease. They thought it a small risk and did so.
     
  7. kennyboi

    kennyboi Well-Known Member

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    It seems like their solicitor is useless. Is it too late for them to change solicitor now? If not too late, what is the process?

    Terry, are you specialise in business sale?
     
  8. Nick Valsamis

    Nick Valsamis Well-Known Member

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    You can always change solicitor but may have to pay the one already engaged for their time to draw up the contract though.
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I don't do this sort of work anymore, I just specialise in my areas of interest.
    @larrylarry might be able to help.
     
  10. kennyboi

    kennyboi Well-Known Member

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    I got told the buyer worried the landlord refuse to sign lease with them after paying the money hence this unreasonable demand. How does this normally get addressed in the contract?
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The buyer could have a clause allowing them to rescind the contract if the lease cannot be assigned.
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    The vendor of the business will be required to guarantee the performance of the assignee for the balance of the lease period. The lessor is in no worse a situation, your friend only has a concern if the buyer defaults.
     
  13. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    There are lawyers who specialise in business contracts. Business brokers know who these firms are. There are many conditions needed in such a contract eg : what is being bought ? restraint of trade ? assets v goodwill, terms for finance, leases, GST, existing debts (vendors obligation), discharge of guarantees over assets etc etc, .

    Its never too late to change lawyers. May cost more but if it protects its well worth the investment.

    Until the contract is agreed NOTHING should change.
     
  14. kennyboi

    kennyboi Well-Known Member

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    Really appreciate all your responses. I had guided them in the right direction and they have reminded their lawyer he should look after their best interest.
     
  15. Ed Barton

    Ed Barton Well-Known Member

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    Look after their best interest? Your friend should fire the lawyer and the lawyer should stick to
     
  16. RPI

    RPI Property Lawyer, Town Planner Business Member

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    All business contracts should be subject to and conditional upon transfer of lease. Standard form contracts in QLD have a standard condition as to whether the purchaser requires a new lease or transfer of the existing one.

    Guide to REIQ business contract attached.
     

    Attached Files:

  17. kennyboi

    kennyboi Well-Known Member

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    Buyer eventually pulled out after they refuse to sell using his shady requested method. They are out of pocket for legal expense, but better than loosing the business.