- Whether selling your business frees you from a lease or a personal guarantee depends on the lease, the guarantee and the sale terms, so it is worth confirming with a lawyer before you close.
- Whether a landlord can pursue you if the buyer defaults depends on the lease, any guarantee and what the landlord signed.
- The safest route is a written release from the landlord, ideally agreed before the sale closes.
You sold the business, the buyer took over the premises, and you moved on. Then the buyer falls behind on rent and the landlord's letter arrives at your door. This is a common fear for sellers, especially those who signed a personal guarantee.
This article explains in general terms why a seller can stay connected to a lease after closing, and how people usually try to get released. Because the answer turns on the exact documents, a lawyer should read them before you rely on any assumption.
Why the lease can follow you
When you sell and the buyer takes over the lease, you and the buyer agree between yourselves that the buyer will now carry the obligations. Whether the landlord can still look to you after that depends on the lease and any consent the landlord signed, so it is worth confirming with a lawyer.
The landlord's consent document is therefore important. Read it for any wording that says whether you remain responsible, or whether you are released.
Personal guarantees
A guarantee is a separate promise, often signed by an owner personally, to cover the tenant's obligations. It may have its own terms about how long it lasts, what it covers and whether it continues if the lease is assigned, renewed or changed.
If you guaranteed the lease for your company and the business is sold, check whether the guarantee refers to the original term only or to renewals and extensions, and whether it says anything about an assignment.
Documents to read before you rely on anything
- The lease and every amendment, renewal or extension.
- Any personal guarantee, and any indemnity you signed.
- The landlord's consent to assignment, if there is one.
- The purchase agreement, including what the buyer promised about the lease.
- Any security deposit arrangements.
Between you and the buyer, the purchase agreement often decides who is meant to pay if the lease is breached, and may include an indemnity from the buyer. Whether an indemnity from the buyer protects you, and how it affects the landlord, depends on the wording of the documents and your situation, so it is worth confirming with a lawyer.
How sellers try to get released
The usual approach is to ask the landlord for a written release of you and any guarantor as part of the assignment. Landlords may agree if the buyer is financially strong, or may ask for a new guarantee from the buyer, a larger deposit, or other security. If the landlord will not release you, you can ask for smaller protections, such as notice of any default so you have a chance to step in.
Other protective steps include taking security from the buyer, negotiating a price holdback tied to lease performance, or limiting the length of your exposure. Which of these is realistic depends on your bargaining position and the landlord's response.
What to do next
- Gather the lease, any guarantee, the consent and the purchase agreement.
- Ask a lawyer whether you remain exposed and for how long.
- Request a written release from the landlord before closing.
- If no release is given, negotiate notice of default rights and indemnity protection from the buyer.
- If you receive a demand from the landlord, do not ignore it; get legal advice quickly.
Frequently asked questions
Can the landlord still sue me if the buyer stops paying rent?
It can depend on the lease, any guarantee and any release. If the landlord has not clearly released you, it may still look to you. A lawyer can read your documents and tell you where you stand.
Does selling my business cancel my personal guarantee?
What a sale does to a guarantee, including how long it lasts and what it covers, depends on the wording of the guarantee and your situation, so it is worth confirming with a lawyer. Get it reviewed before closing.
Is an indemnity from the buyer enough?
An indemnity is a promise to cover a loss, and it is only as useful as the buyer's ability to pay. How it works alongside the lease and the landlord's rights depends on the wording of your documents, so it is worth confirming with a lawyer.
How do I get released from the lease?
Ask the landlord for a written release, ideally as part of the consent to assignment and before closing. The landlord may ask for something in return, such as extra security from the buyer.
This is a business purchase or sale question
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