A lease ending soon or needing landlord consent

For a restaurant, a clinic, a shop or a workshop, the premises are often a large part of what you are paying for. Customers know where to find the business, the fit-out has been paid for and permits may be tied to the site. If the lease ends soon after you buy, or the landlord will not let it pass to you, much of that value can disappear.

Several things can go wrong. The lease may have little time left and no right to renew, leaving the landlord free to refuse a new lease or to offer one at a much higher rent. Many business leases need the landlord's consent before they can be assigned to a buyer, and landlords often want a rent deposit, a guarantee or evidence of financial strength before they agree. Even in a share sale, where the tenant company does not change, the lease may treat a change of control as needing consent. Rent reviews, break clauses, repair obligations and the cost of restoring the premises at the end of the lease can add costs the listing does not show. Lenders also tend to compare how long the lease runs with the term of any loan.

Rights to renew vary by country. In England and Wales, for example, many business tenants have a statutory right to renew, but landlord and tenant can agree to contract out of that protection before the lease is granted, and the Law Commission is currently reviewing those rules. Take advice from a property lawyer in the country where the premises are.

This flag is usually fixable. Buyers commonly make the landlord's written consent, or a new lease on acceptable terms, a condition of completion (closing in the US). It becomes a deal breaker when the location is the business and the landlord will not cooperate. Loupe's valuation tool reduces the multiple, by 10% at its starting settings, where the transfer of leases, licences or key contracts is uncertain.

• The listing does not state how long the lease has left, or says terms are to be negotiated.
• The lease ends before you would expect to repay any acquisition loan.
• The seller has not approached the landlord, or would rather you did not contact them.
• The landlord can end the lease early under a break clause, or plans to redevelop the site.
• Rent is well below local market levels, which suggests a rise at the next review or renewal.
• The seller gave a personal guarantee that the landlord will want replaced.
• The seller or a company they control owns the premises, so the rent may not reflect what an independent landlord would charge.
• The premises need repairs that the lease makes the tenant's responsibility.

• How long is left on the lease, and is there a right to renew or an option to extend?
• Does assigning the lease, or a change of control, need the landlord's consent, and on what conditions?
• Have you spoken to the landlord about a sale, and how did they respond?
• When are the next rent review and any break dates?
• Are there rent arrears, disputes or outstanding repair notices?
• Have you given a personal guarantee or rent deposit that the landlord will expect a buyer to replace?

• The full lease, with all variations, side letters and consents for alterations
• Records of past rent reviews, and current rent and service charge statements
• Correspondence with the landlord or managing agent from the last three years
• Any schedule of condition, repair notices or claims for dilapidations
• Details of guarantees and rent deposits in place
• The landlord's written position on assignment or a new lease, once you are ready to approach them