Closed on my auto repair shop sale last month. My attorney told me to get the lease assignment signed at the same closing table as the bill of sale. I pushed back because the landlord was dragging his feet on a consent form. We closed without the assignment, just a side letter saying the buyer could occupy. Now the landlord says the original lease is void because I transferred the business without written consent. Buyer is threatening to walk and I'm stuck in the middle. Anyone else been through this? Why is it so critical to have the assignment signed at closing and not after?
Commercial Lease
Why lease assignment paperwork must be signed alongside closing docs
Usually the lease has an anti-assignment clause that says any transfer without consent is void or a default. Signing the assignment at closing doesn't fix the landlord's consent issue by itself. But it forces the issue. If you close the sale without it, you've already handed over the keyys and the buyer has no direct obligation to you or the landlord under the lease. That's the gap.
Not a lawyer but I've bought two small businesses. Every time the lease assignment was a separate document that the landlord had to sign. Closing without it is basically closing without a material piece of the deal. Why would your attorney let that happen?
He didn't "let" it happen. He advised against it. I made the call because the landlord was unresponsive and I had a buyer with financing expiring. I own that.
The reason you sign at closing is because the assignment is the legal mechanism that puts the buyer in your shoes under the lease. Without it, the buyer is a subtenant or licensee at best. If the lease prohibits transfers without consent, your side letter may itself be a default. Landlord might be right depending on the la nguage.
What does the lease actually say about assignment? Does it require consent "not to be unreasonably withheld" or is it sole discretion? That changes everything.
Lease says "Tenant shall not assign or transfer without Landlord's prior written consent, which consent may be withheld in Landlord's sole discretion." So I'm probably screwed. Buyer wants out.
Sole discretion is brutal. Even if you had the assignment signed at closing, the landlord could still refuse consent and you'd have a buyer with an unenforceable lease. The real issue is you closed before getting consent, not before getting the assignment. Two separate things.
This is why you don't close without landlord consent if the lease requires it. Period. The assignment document is just the paper. The consent is what matters.
Also, if the buyer is operating under a side letter, your insurance and liability situation is a mess. If someone gets hurt at the shop, who's on the hook? You might still be named on the lease. Hope you have a good indemnity in the purchase agreement.
At this point you need to negotiate with the landlord. Maybe offer a personal guarantee or a rent bump to get consent after the fact. Otherwise the buyer may have a claim against you for failing to deliver the lease rights.
OP, what did your pucrhase agreement say about the lease? Was it a condition of closing that you deliver an assignment and consent?
The purchase agreement had a condition that landlord consent to assignment be delivered at closing. I waived it. So yeah, buyer may have a claim. I was trying to salvage the deal and made it worse.
Lesson for everyone reading: don't waive landlord consent conditions. The assignment paperwork at closing is only as good as the consent behind it., And if the lease has sole discretion language, you need to get that consent in writing well before closing, not at the table.