Buying or Selling a Pharmacy? Understanding Property and Lease Issues with Third-Party Landlords

Buying or selling a pharmacy can be a very complex process. One of the most important aspects to consider is the property element of the transaction and where the pharmacy premises is held under leasehold title. At Buxton Coates Solicitors, we regularly advise pharmacists and pharmacy business owners on the property issues that can arise in these transactions, ensuring the process runs as smoothly as possible.

Transfer of existing lease 

If the property is held under a lease with a third-party landlord, the seller will need the landlord’s permission to transfer the lease to the buyer. This is typically done through a licence to assign, which is a formal document allowing the lease to be transferred from the seller to the buyer.

Third-party landlords often have their own legal representation, and their solicitors’ costs will usually need to be covered by way of an undertaking from the buyer’s or seller’s solicitor. This is an expense that can easily be overlooked at the outset, but one that both parties should budget for.

In some cases, the landlord may also require:

• the seller to remain as a guarantor under the lease after completion; or

• the buyer to provide a significant rent deposit, which can affect the buyer’s funding arrangements.

These requirements can introduce additional time and cost which is why early engagement with your solicitor and the landlord’s solicitor is so important. This will help you save time and costs to allow the transaction to progress much more smoothly. 

Lender Requirements and Lease Terms

Where a buyer is purchasing with bank funding, lenders almost always require a minimum lease term of 15 years for pharmacy premises. This is because lenders usually want the buyer to have security of the premises for at least the duration of the loan term. Lender will often require the lease benefits from security of tenure.  

If the current lease has less than 15 years remaining, the landlord may need to grant a new lease. This can give rise to additional legal costs and professional fees for both parties, including:

• Costs associated with the surrender of the existing lease and the grant of a new lease; or

• If there is sufficient time left on the lease, the landlord’s fees for approving and negotiating assignment of the existing lease.

It is important for a Seller to check how many years is left on their lease before they look to sell their pharmacy business. It is important for the Seller to also check if the lease benefits from security of tenure.  

How Buxton Coates Solicitors Can Help

Whether you are a pharmacist looking to sell your business or a buyer seeking to acquire your first or next pharmacy, the property element of the transaction should never be underestimated especially where a third-party landlord is involved.

At Buxton Coates Solicitors, we act for both buyers and sellers of pharmacies across the UK. Our commercial property team is experienced in dealing with  the drafting of new leases or surrenders, lease assignments, landlord negotiations, and lender requirements specific to the pharmacy sector. We can guide you through the process, anticipate potential hurdles, and help ensure your transaction completes smoothly.

For tailored advice or an initial discussion about your potential pharmacy sale or purchase, contact our Commercial Property team at Buxton Coates Solicitors today on 0330 088 2275 or info@buxtoncoates.com