When a New Landlord Tried to Reprice a $6.4 Million Business Sale

The situation

Hanna had built her construction company from a two-person operation into a business running steady commercial and residential contracts out of a leased yard and shop on the edge of Barrie. After eighteen years, she was ready to step back, and she found a buyer close to home: Dawit, who owned a construction company of his own and wanted to expand into Hanna's market by acquiring hers outright rather than competing against it. The two negotiated directly for months before bringing their agreement to Treadstone Law to paper the transaction as a share purchase — Dawit's company would buy all of the shares in Hanna's corporation, taking over the business, its contracts, its equipment, and its workforce as a going concern.

The parties settled on a purchase price of about $6.4 million for the shares, subject to standard closing adjustments for cash and working capital on hand. It was a straightforward deal by the standards of a business sale: one seller, one buyer, no competing bidders, and a buyer who already understood the industry well enough not to need much hand-holding. The share purchase agreement was signed with a closing date set for roughly six weeks out. Buried in the conditions to closing was a clause that looked routine at signing and became the entire story of the deal: closing was conditional on the landlord of Hanna's leased yard and shop consenting to what the lease called a deemed assignment triggered by the change in control of the tenant corporation.

What the lease actually said

Hanna's company did not own its yard and shop; it leased the property, with roughly six years left on the term. Commercial leases routinely include a change-of-control clause that treats a sale of the majority of a corporate tenant's shares the same way it treats a sale of the lease itself — as an assignment requiring the landlord's consent — even though the tenant entity does not legally change. The logic is that landlords choose their tenants based on who is actually running the business behind the corporate name, and a share sale can swap out that operator just as completely as an outright assignment would.

Three months before Hanna signed her deal with Dawit, the property had been sold to a new owner — a private group that had bought a small portfolio of industrial properties in the area and was managing them through a property manager, Bohdan, who had never dealt with Hanna's company before. Hanna's business had been a stable, on-time-paying tenant for years under the previous landlord and had never needed to ask for anything. The new landlord had no relationship history to draw on, and Hanna's consent request landed on a desk with an incentive structure of its own: bringing an existing lease up to a rate closer to what the new landlord believed the space could command elsewhere.

When Hanna's team formally requested consent to the change of control, Bohdan responded on the new landlord's behalf with a list of conditions attached to that consent. Base rent, still several years from its next scheduled increase under the lease, would need to rise by roughly $6,000 a month effective immediately. A one-time administrative and assignment fee of about $75,000 would be due before consent was granted. Dawit's company would need to personally guarantee the lease for the entire remaining six-year term. And Hanna's corporation — the seller, about to be sold out from under her — would be asked to remain jointly liable as guarantor indefinitely, with no end date tied to closing. With a six-week closing deadline and a buyer who had not signed up for any of this, Hanna and Dawit needed the consent question resolved fast, or the deal risked falling apart over a landlord neither of them had chosen.

What we did

1. Read the lease's consent clause closely, not just the change-of-control clause. Most commercial leases pair a change-of-control clause with a separate promise that the landlord will not unreasonably withhold, delay, or condition its consent to an assignment. Hanna's lease had exactly that wording. That single phrase turned the new landlord's list of demands from a take-it-or-leave-it position into a set of conditions we could test against a reasonableness standard, rather than accept as the price of doing business.
2. Separated the reasonable requests from the opportunistic ones. A landlord asking to confirm the incoming tenant's financial capacity, or requesting a corporate guarantee from the buyer going forward, is generally within its rights. An immediate rent increase unconnected to the lease's own schedule, a large one-time fee tied to nothing but the transaction itself, and an indefinite guarantee from a seller who was leaving the business entirely, were a different matter. We wrote to Bohdan setting out, term by term, which requests we would work with and which were being treated as leverage rather than legitimate landlord protection.
3. Negotiated the rent question down to what the lease already provided for. The lease contained its own scheduled rent step at a future date. Rather than accept a new, immediate increase layered on top of that schedule, we proposed advancing the already-agreed step by a defined number of months in exchange for consent — giving the landlord a real, near-term increase without inventing a figure that had no basis in the lease the parties had actually signed.
4. Pushed the assignment fee down to a defensible administrative amount. We asked Bohdan directly what the $75,000 figure was meant to cover, since a landlord's consent fee is generally expected to reflect actual administrative and legal costs of processing the request, not a share of the transaction's value. After some back-and-forth, the fee came down to a small flat amount that a landlord could plausibly justify as processing costs.
5. Limited the guarantee to the buyer, and released the seller at closing. We agreed that Dawit's company would provide a corporate guarantee of the lease going forward — a request we considered reasonable, since the landlord was entitled to know who stood behind the tenant after the sale. In exchange, we insisted that Hanna's corporation's guarantee obligations end on closing, not continue indefinitely. A seller who no longer controls the business or the property has no ongoing way to manage the risk a lease guarantee is meant to cover.
6. Built the consent into the closing mechanics instead of leaving it loose. Once terms were agreed in principle, we had the landlord's consent documented in a signed consent-to-assignment agreement, incorporated as a closing document rather than a side letter, so its terms could not shift again in the final days before closing. We also asked for and obtained the consent about two weeks ahead of the closing date, giving both sides room to resolve any last details without the deal running against the clock.

The outcome

The share purchase closed on schedule, with the consent negotiation adding roughly ten days of extra work rather than derailing the six-week timeline the parties had originally set. The rent increase that took effect was the one already built into the lease, simply advanced by a few months — not the new figure the landlord had first proposed. The assignment fee came in at a fraction of the original demand. Dawit's company provided the guarantee going forward, which he had never objected to in principle, and Hanna's corporation was released from any lease obligations the moment the sale closed, leaving her with a clean exit from a business she no longer controlled.

Hanna received the full $6.4 million purchase price on the terms she had negotiated with Dawit directly, without the landlord's late intervention reducing the deal's value or its timeline. Dawit took over a lease with a rent schedule he understood in advance rather than one inflated at the last minute, and a guarantee obligation sized to what he had actually agreed to when he signed the share purchase agreement. The new landlord, for its part, got what a reasonableness standard in a commercial lease is meant to produce: a legitimate increase tied to the lease's own terms, a fair administrative fee, and a solvent, guaranteed tenant going forward — without the windfall it had initially tried to negotiate on the back of someone else's transaction.

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