Does my landlord’s attitude toward lease assignment affect my business’s value?

If your business operates from leased premises, the right to stay there is part of what a buyer is acquiring. A landlord who will not accept the buyer can take that away. So how willing the landlord is to consent matters, even if it never appears on a financial statement. Whether it changes the price depends on the premises and on what the lease says.

What buyers are told to check

BDC’s due diligence guide tells buyers to make sure that key contracts, such as leases, regulatory agreements and customer contracts, can be assigned to them if necessary. BDC’s guide on negotiating a sale adds that findings made in due diligence can lead to price chips or to adjusted deal terms, such as holdbacks, to cover newly discovered risks. A landlord whose position is unknown or unfavourable could be one such finding.

What the law may add

This is a provincial matter. Ontario’s Commercial Tenancies Act, s.23(1), provides that in a lease with a covenant against assigning without licence or consent, the covenant is deemed subject to a proviso that consent is not to be unreasonably withheld, unless the lease contains an express provision to the contrary. Under s.23(2), if the landlord refuses or neglects to consent, a judge may, on the application of the tenant or the assignee, determine whether consent is unreasonably withheld. Other provinces have their own rules, and the lease wording can change the outcome.

What to find out before you list

• what the assignment clause says, and whether it excludes the unreasonable-withholding proviso
• what the landlord may ask for, such as financial statements from the buyer or a guarantee
• how many years remain, and whether a renewal right survives an assignment
• how and when to approach the landlord without alerting staff or customers too early

For the legal position itself, see can my landlord refuse to assign my lease. For the renewal side, see how do I handle a lease renewal before selling.