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propertylawyer
propertylawyer, Solicitor
Category: Law
Satisfied Customers: 280
Experience:  Property Solicitor with expertise in commercial and residential property transactions.
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I am selling my limitted company together with my business

Resolved Question:

I am selling my limitted company together with my business (restaurant). At the moment in my lease my company and I appear as a guarantor. My buyer who is planning to take over the company together with his partner does not wish to be a guarantor. If in the company has more that one director does someone still have to apper as guarantor?
Submitted: 1 year ago.
Category: Law
Expert:  propertylawyer replied 1 year ago.

Hi Sofya

Thanks for your question.

On the transfer of a lease the landlord will want to establish that the incoming tenant is a good financial covenant, this will be done by taking references etc. As you needs landlord's consent to transfer the lease you need to convince the landlord that the new tenant can afford the rent. This will be an issue if the buyer is to acquire the business and assets in the name of a new ltd company. Therefore the landlord, as part of granting consent, can request that the new tenant provide either a guarantor or rent deposit or both. All of this should be set out in the alienation/assignment provision in your lease.

If the buyer does not want to guarantee the company it can provide a rent deposit. Rent deposits are far more commonplace than guarantors. I would say than the vast majority of commercial lease transactions involve a rent deposit, occasionally the tenant has to provide a guarantor as well.

As for your position on assignment of lease, the landlord will require the tenant company and your personally in your capacity as guarantor to act as a guarantor to the incoming tenant under an authorised guarantee agreement (AGA). A landlord will not agree to a transfer of the lease without the outgoing tenant and guarantor, if any, entering into an AGA guaranteeing that the new tenant will pay the rent and observe and perform the obligations in the lease.

An AGA imposes principal debtor liability. Under the terms of an AGA you can be required to take a new lease for the remainder of the term if the new tenant becomes insolvent and the lease is disclaimed by a liquidator/administrator etc.

Your liability under the AGA will run until the lease comes to an end or the new tenant transfers the lease to a 3rd party.

I hope this helps to clarify the position. Do let me know if you have any queries.

Please do accept/rate my reply.

Kind regards

Paul

Customer: replied 1 year ago.
Thank you for your reply.
We already had a meeting with landlord and also I introduced the potential buyer. Landlord is aware of my wish to be out of the lease as a guarantor. Buyer does not wish to be a guarantor as he got another business way bigger from what he is buying from me and in that lease he doesn't appear as guarantor but his company does. Landlord agreed to his condition. The problem that Im experiencing now is that landlord is away. My lawyer was in touch with his. I was passing over the references about buyers to my lawyer so she can pass them over to the landlords solicitors. Just last friday I found out that she went away on holiday without passing over my case or even notifying me about it. I tried to contact my landlords solicitor but he doesn't wish to speak to me. He will only speak to the lawyer. At the moment i have no funds or time to spend on another lawyer because my buyer wanted to move in the property before the new rent payment. Could you give me advice what can i do? I thought that i could just sell the company and stay as a guarantor for couple of months? Would it be possible to resign myself as a guarantor in the future?
Kind regards,
Sofya Aleynikova.
Expert:  propertylawyer replied 1 year ago.

Hi

Thanks for the additional information.

Not much I can do sadly regarding the issue of your solicitor being away. Ring the firm and insist they pass it to another solicitor or you will dis-instruct and go to another firm. If you do go to another firm then before releasing your file you will have to pay fees to date.

Back to the lease, if you as guarantor do not want to enter into the AGA then you need to negotiate this with the landlord. You will have to enter into the AGA to get consent to assign the lease unless the landlord waives this requirement.

You cannot resign as guarantor during the term of an AGA.

I hope this helps.

Customer: replied 1 year ago.
Thank you very much for your help!
Expert:  propertylawyer replied 1 year ago.

No problem Sofya

Please can I ask you to accept/rate my reply so that I receive credit for my time/advice.

Kind regards

Paul

Customer: replied 1 year ago.
Ofcourse Paul i will. May i ask you only one question. Does it have to be a lawyer to pass the information about the buyer? If i do it myself anyway? I dont understand the need of it. By solicitor is actually a business consultant. How come it matter so much?
Customer: replied 1 year ago.
Sorry my solicitor is actually a business consultant
Expert:  propertylawyer replied 1 year ago.

You can pass the information about the buyer to the landlord directly if you have the landlord's contact details.

I am not sure i understand - what does not matter so much -information about the buyer? This is vital for the landlord. The landlord needs to know who the new tenant will be and will be able to pay the rent.

If your 'solicitor' is only a business consultant he/she may not have the legal knowledge to correctly advise you on the implications of ongoing liability by transferring the lease. I have explained this above but simply put IF THE NEW TENANT DOES NOT PAY RENT YOU MAY HAVE TO UNDER THE TERMS OF THE AGA.

Expert:  propertylawyer replied 1 year ago.

as your 'solicitor' is not a solicitor but a business consultant just find out the email address of the landlord's solicitor (ring the firm and ask for it). send an email, explain that you are being advised by a business consultant and not a solicitor and to expedite the matter you are emailing details of the prospective new tenant direct.

propertylawyer and 2 other Law Specialists are ready to help you
Customer: replied 1 year ago.
Great. Thank you.