Cam Appleton | Change of control: Vancouver Commercial Real Estate Encyclopedia

For example: A seller planning a share sale checks the lease, finds a change-of-control clause, and asks the landlord for consent anyway. (Illustration only, not a real deal.)

Official source: Commercial Tenancy Act (BC Laws)

Example only, not a real client. Say you are selling the shares of your company, which holds a lease. The lease treats a change in control as an assignment that needs consent. We raise it early with the landlord, so consent is in place before closing.

What I’d tell a friend

If your company holds a lease and you plan to sell shares or bring in investors, check the change-of-control clause first.

Why it matters to you

Selling the shares of your company can count as assigning the lease. If the landlord's consent is required and you skip it, the buyer can inherit a default and your sale can stall.

How to use it in your deal

Tenants should negotiate exceptions: transfers to affiliates, family members or for estate planning, public company share trading, and internal reorganizations. Ask that consent not be unreasonably withheld and that the landlord respond within a set time.

If you're planning to sell your business, read the clause early, since a share sale may need consent just like an asset sale. Landlords use the clause to protect tenant quality and may ask for financial information about the new owners. Buyers of businesses should make landlord consent a condition. Lenders financing a share purchase will want to see consent.

Ask your lawyer to check every lease, loan and major contract for change of control clauses before you sell shares, since one missed consent can hold up closing. Many leases treat a sale of the tenant company's shares as an assignment that needs landlord consent.

Mistakes I see

Assuming share sales avoid consent. Not planning for estate transfers. Missing the clause in due diligence.

In BC and Vancouver

The lease controls. BC courts interpret consent clauses based on wording.

Official sources: CanLII (court decisions)

What it means

Many leases treat a change in who controls the tenant company, such as a share sale, as an assignment that needs the landlord’s consent.

Without consent, the sale could put the lease in default.

Planning for it

Ask for exceptions for transfers within your corporate group, public share trading or estate planning.

Build consent time into your sale timeline, and check with a BC lawyer.

Questions to ask before you sign

Does a share sale need consent?
What exceptions exist?
How long does the landlord have to answer?
What information will they want?

Many leases treat a change of voting control as a transfer. Selling the company that is the tenant can therefore need the same landlord consent as assigning the lease.

Buyers of businesses miss this and blow a closing date. Read the transfer definition before you sign a letter of intent, and put consent on the critical-dates list.

Your lawyer should align the purchase agreement with the lease.

Keep reading

Related terms: Assignment (lease), Share sale

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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.