Third-party consent condition

A business can be a bundle of leases and contracts, and some of them may not move to a new owner without the other side’s approval. BDC notes that there may be leases or contracts where the vendor needs to get the consent of third parties to transfer them to a new owner. A third-party consent condition lets the buyer, or both sides, make closing wait for those approvals.

How lease consent differs by province

Lease rules can differ by province. Ontario’s Commercial Tenancies Act, section 23(1), says that where a lease covered by the section has a covenant, condition or agreement against assigning, underletting or parting with possession without licence or consent, it is deemed to be subject to a proviso that the licence or consent is not to be unreasonably withheld, unless the lease contains an express provision to the contrary. Under section 23(2), where the landlord refuses or neglects to consent to an assignment or sub-lease, a judge of the Superior Court of Justice, on the application of the tenant, assignee or sub-tenant, may decide whether the consent is unreasonably withheld. That is Ontario’s rule. Other provinces have their own law, and the lease wording matters in every province.

What to check or ask

• Which leases and contracts restrict assignment or a change of control, and in what words
• Who must ask for each consent, and by what date
• Whether the consent must be in writing and say what happens to the seller’s own obligations
• What each side may do if a consent has not arrived by the deadline

For the wider list, see which third-party consents you may need to close a business sale.