If you are considering selling your practice, there will be a couple of routes to choose from. You can choose to sell the assets or the shares. If you choose the latter, this will mean that all assets owned by the practice (“the target company”) will be sold. If the freehold interest of the property is owned by the target company, the freehold interest will be acquired at completion. A buyer may not want to buy the freehold and in many cases would prefer to take a lease.
In order for you to grant a new lease to the corporate acquirer, you will need to extract the property from the target company by transferring it out. The target company will transfer the freehold interest to another party (or parties). There will be tax considerations associated with doing so and you will need to speak to both your accountant and the solicitor dealing with the sale of your practice to ensure that you are given advice as early as possible during the transaction.
An asset sale of your practice would require different considerations. You may occupy the property under a lease which sits in the name of the target company, but your landlord may be a third party. A buyer will have their own specific requirements in relation to any lease which you will discuss at the heads of terms stage of the deal.
Buyers normally want a lease with a remaining term of 15 to 20 years. If your lease has a shorter term, then it is likely that the buyer will ask for a surrender of the existing lease and want to enter into a new lease directly with your landlord. Most landlords are happy to grant new leases to buyers with a strong track record due to their strength of covenant.
In situations where there is a third-party landlord involved, your landlord will need to be advised of the proposed sale. Your landlord will need to instruct a solicitor to engage with your solicitor to ensure that the legal documents are negotiated and agreed. Should you have concerns regarding confidentiality, it is worth telling your solicitor as soon as possible.
You would be wise to discuss the sale with your landlord first. It can be difficult for a landlord to receive news of the proposed transaction from a solicitor without having first had a conversation with the tenant. Should you have a poor relationship with your landlord, there are additional steps your legal team can take to ensure you are comfortable with divulging the details of the proposed sale.
It is critical that you seek legal advice early to ensure that the structure of the property piece is clear and that the appropriate steps are taken as early as possible.
If you would like further advice on this issue, please contact Natasha Thomas at: nathomas@hcrlaw.com
