Buying a lease on a existing business

[n.tipp]

I am in the very early stages of looking into buying a lease on an existing sandwich shop.
My question at this stage is if a 10 year lease for example costs £40K to buy what happens at the end of the lease ie what happens to my £40K?

 

[Scalloway]

It's gone. You are buying the opportunity to use the unexpired portion of the lease.

 

[obscure]

Are you buying an existing business or just a lease on the premises? At the end of the lease it expires and you have to pay again or move your business elsewhere.

 

[deniser]

Well actually it depends on the status of the lease.

Some leases are protected by the Landlord & Tenant Act 1954 - well the intention is that they all should be but a great number are contracted out these days - so, provided you fulfill the conditions, you will be entitled to a new 10 year lease when the existing lease ends.

So you need to find out whether your lease is inside (ie. protected) or outside (ie. contracted out) of the Landlord & Tenant Act 1954. It should be on the property details if you have them. Otherwise you need to ask the agent or the existing tenant.

But yes, you need to be clear what you are paying the £40K for. This is not usually for the lease itself (or at least not all of it) but for something to do with the business. You will need to ask for the breakdown of the £40K between:
Goodwill
Fixtures and Fittings
Lease Value
The cost of improvement works undertaken by the tenant since the lease started
Stock
Contents
and decide whether you are getting value for money.