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Sale and Leaseback

What is a Sale and Leaseback?

A Sale and Leaseback is a type of real estate transaction in which a seller sells his property, and on completion, the buyer and leases part of all of the premises back to the seller. Selling a commercial property is a straightforward means of releasing capital was previously tied-up in property equity; a Sale and Leaseback agreement allows business owners to sell their properties without having to interrupt business proceedings and relocate.

What are the advantages of a Sale and Leaseback agreement?

Sale and Leasebacks are becoming an increasingly popular way for business owners to generate cash quickly without affecting their business operations. There are a number of advantages to agreeing to a Sale and Leaseback agreements, not just for the seller, but also for the buyer.

 

Do you need help and guidance with a Sale and Leaseback agreement? Then get in touch with our experienced team of solicitors here at Pabla & Pabla Solicitors.

 

Advantages for the seller/new tenant include:

-          Releasing a large sum of money quickly. Selling a property is a way of releasing much-needed funds. Sellers can use the money to expand their businesses further, either by investing the money in new projects or by paying off debts that are affecting the company's ability to succeed.

-          The property continues to be the business's headquarters, both during and after the sale transaction. This means the seller doesn't have to worry about having to relocate and his business's operations being interrupted. The leaseback element of the Sale and Leaseback transaction ultimately means that the tenant will lease the property back after the sale has completed, becoming its tenant instead of its owner. Furthermore, many lease back agreements are for the long-term, with the buyer expecting the tenant to remain in the property for years rather than months. Sellers who agree to remain in the property for longer terms are usually offered more money by prospective investment buyers than sellers who only seek a short-term lease.

-          The seller no longer has to worry about market fluctuations that could affect the value of his property. By selling the property and choosing to lease it back, the tenant is able to use the property without having to deal with the stress that comes with being a commercial property owner.

-          The tenant will most likely be responsible for the property. Most Sale and Leaseback agreements contain clauses which make the tenant responsible for maintaining and repairing the state of the property. The clause allows the tenant to remain in charge of the property and reduces the landlord's involvement in the running of the property.

Advantages for the buyer/landlord include:

-          The property comes complete with a reliable tenant. The leaseback element of the agreement means the seller remains in the property for the long-term, saving the seller the hassle of having to finding a tenant.

-          There is an immediate return on the buyer's investment in the form of rental payments.

-          The landlord won’t have to worry about the property’s upkeep. Like most commercial tenancies, the leaseback agreement will have a clause naming the tenant as the party responsible for maintain the property. This benefits the landlord in that it reduces the amount of work the tenant has to put into the property.

Why is a Sale and Leaseback something that requires the help of a solicitor?

When it comes to buying and selling commercial property, it is always advisable to seek the help of an experienced legal professionals. Conveyancing is the legal term used to describe the process of transferring a property from one owner to another; it is a process that is fraught with technical complexities and legal loopholes and should therefore be handled by a qualified solicitor. With a Sale and Leaseback agreement, the transfer of the property isn't the only thing that has to be handled; there's also the lease, the document which will govern how the property is leased back to the seller. All leases are legally binding documents and should therefore be handed to a legal professional for examination prior to being signed. 

How can Pabla & Pabla Solicitors help me?

Sale and Leaseback agreements have the potential to deliver good returns, both for the seller and the buyer, but only if the agreement is well structured. Here at Pabla, we understand that drafting agreements can be a complicated process; our team of commercial property solicitors will be on hand to help you structure an agreement that maximises your gain as either a buyer or a seller. We can help you to draft a lease that is fair, free of ambiguities, and legally binding. Contact us today to discuss your needs.

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