How do I sell a business with a portfolio of leases at multiple locations?

BDC’s guide to selling says to make sure you are not passing on legal headaches: review contracts, leases and business agreements, and update them if needed. With several locations, each lease may have its own landlord, expiry, renewal rights and assignment clause. BDC’s due diligence guide, written for buyers, says to make sure key contracts such as leases can be assigned to you if necessary. Each site needs its own answer before any buyer asks.

Build a schedule of the leases

Start with one table. For each location, record the landlord, the expiry date, any renewal option, the clause on assigning or sub-letting, any guarantee you have given, and any deposit. Then note which leases are close to expiry. Ask your lawyer to read each one, because a clause in a single lease can change the plan for the whole portfolio.

Consent and the governing law

Commercial leases are governed by provincial law, so the answer differs by province. In Ontario, section 23(1) of the Commercial Tenancies Act says that a lease made after 1 September 1911 containing a covenant, condition or agreement against assigning, underletting or parting with possession without licence or consent is deemed to be subject to a proviso that consent is not to be unreasonably withheld, unless the lease contains an express provision to the contrary. Under section 23(2), where a landlord refuses or neglects to consent, the tenant, assignee or sub-tenant can apply to a judge of the Superior Court of Justice for an order determining whether consent is unreasonably withheld. Other provinces have their own rules; see the guides for Alberta, British Columbia and Quebec.

Sequencing across sites

Whether leases must be assigned depends on how the sale is structured, and whether contracts and leases transfer in an asset purchase is a separate question. In a share sale, check whether each lease treats a change of control as an assignment. Approaching a landlord tells that landlord a sale is coming, so decide with your lawyer when each one is contacted and whether the agreement will be conditional on every consent, only the key sites, or none.