A more recent version of these Property And Environmental Aspects notes – written by Cambridge And Oxilp And College Of Law students – is available here.
The following is a more accessble plain text extract of the PDF sample above, taken from our Private Acquisitions Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:
Property and Environmental Aspects
Property Aspects Issues for Buyer Essential element is that Seller/Target has good and marketable title to the Properties so on both share sale and asset sale the Buyer will want to check:
* Value of property
* That title is vested in seller (business sale) or target (share sale)
* Any contingent liabilities
* Any contingent environmental liabilities
* Relevant planning permission obtained
* Can be used for actual and proposed use
* Any third party rights adversely affecting the Property
* Full information in respect of SDLT history
* Any charges or debentures burdening Property
* Any consent required for transaction to go ahead: o Landlord's consent to assign (business sale) o Consent under a change of control clause (share sale) Due Diligence Specifically going to be looking for existence of any: Original Tenant Liability
If Tenant was original tenant of an Old Lease, remains liable to landlord for tenant covenants in the lease infinitely:
* Liability would pass to Target on Share Sale
* Liability would pass to Target on Business Sale if leasehold interest included in sale.
* If leasehold interest not included - Buyer will take free from liability.
Authorised Guarantee Agreement
If Tenant was original tenant of a New Lease then tenant will automatically be released from any obligations under the lease if assigned BUT:
* If an AGA was given - Tenant will have guaranteed the assignee's obligations
* Target could thus remain liable to original Landlord
* Check data room for copies of any relevant AGA
Tenant's Right of First Refusal
Where property is mixed commercial/residential, residential tenants will have:
* Right of first refusal on transfer of freehold
* If non residential use is 50% or less
* Due to Landlord and Tenant Act 1987 This means on a Business Sale where Target's business is mixed residential/commercial and Seller wants to sell the multiple occupation property, residential tenants must be offered it first.
Security of Tenure
Under S30(1)(g) LTA 1954 a Landlord can oppose application for new tenancy if landlord intends to occupy the property itself. Needs to be considered:
* On business sale
* When acting for Buyer; and
* Seller is landlord of a lease coming to end within 5 years from completion of sale
* Always check in Lease whether this has been contracted out of (if yes - no problem) Not relevant on a share sale because:
* Landlord / Owner / Target / Tenant remains the same
Establishing Good and Marketable Title
* Buyer will want to ensure they acquire the property with good and marketable title so need to establish: o Seller has good title to all properties o All properties have benefit of all necessary rights required for use/enjoyment o Properties not subject to onerous conditions/third party rights o Properties can be used for purposes intended by Buyer Investigating Title & Protection Business Sale
Buy the full version of these notes or essay plans and more in our Private Acquisitions Notes.