10. PROPERTY & ENVIRONMENTAL ISSUES
ISSUES FOR BUYER TO CHECK
Title vested in S / T = good and marketable title to properties
3rd party rights adversely affecting property (e.g. charges/security that need to be released)
3rd party consents to transaction – consent to assign (business sale) / CoC clause in lease
(share sale)
Value of property
Contingent liabilities (e.g. original tenant liability in leaseholds)
Contingent environmental liabilities
Planning position re: property
o PP for building works and changes of use
o Conditions complied with
o No outstanding planning obligations
o Planning charges have been discharged
Property can be used for actual / proposed use
SDLT + stamp duty history for property
GOOD AND MARKETABLE TITLE
Business sale – S has duty under open contract rules to disclose defects in title, but
otherwise caveat emptor applies
Share sale – no implied duty, so B must establish:
o T has good title
o Properties have benefit of all necessary rights for beneficial use + enjoyment
o Properties not subject to onerous conditions / third-party rights
o Properties may be used for intended purposes
Generally, B, representatives + surveyor make site visit to confirm seller has complied with
repair obligations
B should also obtain valuation
, DD & DEAL STRUCTURE
ORIGINAL TENANT LIABILITY (SHARE SALE)
Was T ever the original or a subsequent tenant of a pre-1 January 1996 (Old) Lease?
If T was:
o The original tenant of an Old Lease; or
o Assigned an Old Lease at some point (so T was the tenant in the past) and it
covenanted with LL in the licence to assign to perform those covenants throughout
the remainder of the term
T will be liable for breaches by the current tenant = potential source of
liability for T on a share sale + could devalue T
Business sale – if LH interest is an asset included in transaction, B becomes new tenant,
so original tenant liability is not an issue for B
AUTHORISED GUARANTEE AGREEMENTS (AGA)
Under New Leases, T automatically released from obligations on assignment; however,
may be required to enter into AGA
Where T has been tenant under New Lease, B should ask whether any AGA liability + see
copies of any relevant AGAs
SECURITY OF TENURE
Target as tenant
Share sale – T remains tenant and can continue to exercise LTA 1954 rights of security of
tenure at the end of its lease term
Business sale – assignment of lease would include assignment of tenant’s rights under LTA
Must check that lease not contracted out of LTA 1954
o T will not have a right to remain in premises after expiry of term + will have no right
to a new lease where:
LL’s notice on tenant
Tenant provided simple or statutory declaration
Lease contains clause referring to both + stating provisions of LTA do notapply
If contracted out, inform client of consequences
Target as landlord
Issue where B / T want to occupy premises + lease not contracted out
LL will have to rely on s 30(1) LTA ground e.g. (g) LL has a firm and settled intention to
occupy the property itself, but this cannot be relied upon where L acquired its interest in the
5 years prior to the expiry of the tenancy (s 30(2) LTA)
Share sale – ensure T has held interest for > 5 years prior to expiry of tenancy
Business sale – if buyer client buys reversion ≤ 5 years before expiry of existing tenancy, it
will not be able to oppose new tenancy on s 30(1)(g) ground
s.42 LTA extends LL’s right to refuse new tenancy under s 30(1)(g) to a situation where the
person intending to occupy is another company in the same group as LL
RIGHT OF FIRST REFUSAL
ISSUES FOR BUYER TO CHECK
Title vested in S / T = good and marketable title to properties
3rd party rights adversely affecting property (e.g. charges/security that need to be released)
3rd party consents to transaction – consent to assign (business sale) / CoC clause in lease
(share sale)
Value of property
Contingent liabilities (e.g. original tenant liability in leaseholds)
Contingent environmental liabilities
Planning position re: property
o PP for building works and changes of use
o Conditions complied with
o No outstanding planning obligations
o Planning charges have been discharged
Property can be used for actual / proposed use
SDLT + stamp duty history for property
GOOD AND MARKETABLE TITLE
Business sale – S has duty under open contract rules to disclose defects in title, but
otherwise caveat emptor applies
Share sale – no implied duty, so B must establish:
o T has good title
o Properties have benefit of all necessary rights for beneficial use + enjoyment
o Properties not subject to onerous conditions / third-party rights
o Properties may be used for intended purposes
Generally, B, representatives + surveyor make site visit to confirm seller has complied with
repair obligations
B should also obtain valuation
, DD & DEAL STRUCTURE
ORIGINAL TENANT LIABILITY (SHARE SALE)
Was T ever the original or a subsequent tenant of a pre-1 January 1996 (Old) Lease?
If T was:
o The original tenant of an Old Lease; or
o Assigned an Old Lease at some point (so T was the tenant in the past) and it
covenanted with LL in the licence to assign to perform those covenants throughout
the remainder of the term
T will be liable for breaches by the current tenant = potential source of
liability for T on a share sale + could devalue T
Business sale – if LH interest is an asset included in transaction, B becomes new tenant,
so original tenant liability is not an issue for B
AUTHORISED GUARANTEE AGREEMENTS (AGA)
Under New Leases, T automatically released from obligations on assignment; however,
may be required to enter into AGA
Where T has been tenant under New Lease, B should ask whether any AGA liability + see
copies of any relevant AGAs
SECURITY OF TENURE
Target as tenant
Share sale – T remains tenant and can continue to exercise LTA 1954 rights of security of
tenure at the end of its lease term
Business sale – assignment of lease would include assignment of tenant’s rights under LTA
Must check that lease not contracted out of LTA 1954
o T will not have a right to remain in premises after expiry of term + will have no right
to a new lease where:
LL’s notice on tenant
Tenant provided simple or statutory declaration
Lease contains clause referring to both + stating provisions of LTA do notapply
If contracted out, inform client of consequences
Target as landlord
Issue where B / T want to occupy premises + lease not contracted out
LL will have to rely on s 30(1) LTA ground e.g. (g) LL has a firm and settled intention to
occupy the property itself, but this cannot be relied upon where L acquired its interest in the
5 years prior to the expiry of the tenancy (s 30(2) LTA)
Share sale – ensure T has held interest for > 5 years prior to expiry of tenancy
Business sale – if buyer client buys reversion ≤ 5 years before expiry of existing tenancy, it
will not be able to oppose new tenancy on s 30(1)(g) ground
s.42 LTA extends LL’s right to refuse new tenancy under s 30(1)(g) to a situation where the
person intending to occupy is another company in the same group as LL
RIGHT OF FIRST REFUSAL
