When selling a business, whether through an asset sale or share sale, it is important to identify any personal guarantees or indemnities you may have signed and to understand the risks of ongoing liabilities under supplier contracts and other agreements. Without taking the proper steps, you could remain personally or financially exposed even after the sale is completed.

This guide explains the key risks and the actions you should take to protect yourself.

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1. Personal Guarantees and Indemnities: What Are They?

A personal guarantee is a legally binding commitment where you, as an individual, agree to be personally responsible for a company’s debt or obligations or in relation to your business.

An indemnity is a contractual promise to cover losses or damages incurred by another party, often used in situations involving financial obligations, supplier contracts, or leases.

You may have signed personal guarantees or indemnities during your time as a business owner or director for purposes such as:

• Bank loans, overdrafts, or credit facilities
• Commercial property leases
• Supplier contracts or trade credit arrangements
• Equipment finance agreements or hire-purchase contracts
• Utility contracts and service agreements

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2. Why Are Personal Guarantees and Indemnities a Risk When Selling a Business?

Ongoing Liability After the Sale

Personal guarantees and indemnities do not automatically end when you sell the business or your shares in the company. This means that, unless you obtain a formal release, you could still be held personally liable for the company’s debts or obligations if the buyer or new owner defaults on payments.

Example Scenario:

You provided a personal guarantee for the company’s £20,000 bank loan. After selling the business, the buyer defaults on the loan. Because you signed the personal guarantee, the bank could pursue you personally for repayment, even though you no longer own the business.

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3. Risks Associated with Asset Sales and Supplier Contracts

In an asset sale, you are selling specific business assets (e.g., equipment, contracts, intellectual property, goodwill) but the original company remains in existence. Unlike a share sale, where the company itself is sold, this structure can create risks related to supplier and service contracts.

Ongoing Liability Under Supplier Contracts

Unless supplier contracts are terminated, assigned, or novated to the buyer, the original company—and by extension, you—may remain liable for ongoing obligations under these agreements. This could expose you to:

• Claims for unpaid invoices or debts
• Penalties for breaches of contract after the sale
• Liability for product or service issues under pre-existing warranties

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4. Practical Advice to Manage These Risks

To protect yourself from ongoing liabilities under personal guarantees, indemnities, and contracts, we advise the following steps:



Step 1: Identify All Guarantees and Indemnities

• Review company records to identify any guarantees or indemnities you may have signed personally.
• Consider common areas such as bank loans, credit lines, supplier contracts, and property leases.
• If you are unsure whether a personal guarantee or indemnity exists, we advise you to make written enquiries to banks, suppliers, and landlords.

Step 2: Secure a Release from Personal Guarantees

• Contact the relevant lender, supplier, or landlord to request a formal release from the personal guarantee or indemnity.
• If a release is not possible, consider negotiating indemnities or guarantees from the buyer as part of the sale agreement to cover your risk.
• Ensure that any release or indemnity is properly documented in writing.

Step 3: Address Ongoing Supplier and Service Contracts

If you are selling the business through an asset sale, take the following steps to address contracts:

• Terminate contracts: If the buyer does not want to continue a particular contract, you should negotiate the termination of that contract with the supplier or service provider to avoid any ongoing liability.
• Assign or novate contracts: Where the buyer wishes to take over the contracts, you should arrange for either an assignment (where the buyer assumes the benefits of the contract but you may still remain liable for obligations) or a novation (where the buyer takes on full responsibility, and you are released from liability).
• Ensure that any assignment or novation is properly documented and signed by all relevant parties.

Step 4: Negotiate Indemnities from the Buyer

• Where it is not possible to secure a release or novation, consider negotiating a contractual indemnity from the buyer.
• This indemnity should state that the buyer will reimburse you for any claims or liabilities arising under personal guarantees, supplier contracts, or other obligations that remain in your name.

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5. Understanding the Risks If You Do Not Act

If you do not act on this advice, you could face serious financial consequences, including:

• Being personally liable for outstanding debts under personal guarantees.
• Ongoing liability for obligations under supplier or service contracts, even if the buyer defaults.
• Legal action from lenders, suppliers, or landlords seeking to enforce guarantees or indemnities.

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6. Checklist: Actions to Take Before Completion of the Sale

✅ Identify all personal guarantees and indemnities you have signed.

✅ Make written enquiries to banks, suppliers, landlords, and other organisations to confirm the existence of any guarantees.

✅ Seek formal releases from personal guarantees where possible.

✅ Negotiate assignment or novation of supplier contracts as part of the asset sale process.

✅ Secure indemnities from the buyer where releases or novations are not possible.

✅ Document all agreements related to releases, novations, or indemnities to protect yourself after the sale.

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Note : This guide is for general information purposes only and does not constitute legal advice. Please consult us for advice specific to your situation.

This year marks the 100th anniversary of the Law of Property Act 1925 – a cornerstone of English law that continues to underpin the law of property in England and Wales to this day.  At our firm, we regularly deal with legal matters where this century-old legislation still plays a central role, from buying and selling commercial property to advising clients on leases, charges, and property rights.

The Origins of the Law of Property Act 1925

Before 1925, English property law had become complex, fragmented, and outdated. The system of land ownership was riddled with overlapping legal and equitable interests, many of which could only be discovered through detailed investigation and specialist knowledge.

The Law of Property Act 1925 was part of a broader package of reforms introduced in the 1920s to modernise and simplify land law in England and Wales. Together with other key Acts passed in the same period – such as the Land Registration Act 1925 and the Trustee Act 1925 – the Law of Property Act 1925 aimed to streamline the system, make conveyancing more efficient, and provide greater certainty for property owners, buyers, and lenders.

Key Features Still in Use Today

While some of its provisions have been amended or repealed over the years, many of the core principles of the Law of Property Act 1925 remain in force and are still applied on a daily basis in legal practice. Some of the key features include:

The creation of legal and equitable interests: The Act clarified that only certain property rights could be legal (such as leases of less than 3 years, mortgages, and easements), while others would be equitable.

The doctrine of overreaching: A vital concept in conveyancing, overreaching allows a buyer to take land free of certain equitable interests, provided the purchase money is paid to at least two trustees or a trust corporation.

Simplified transfer of land: The Act reduced the number of legal estates to just two – the freehold estate and leasehold estate – making it easier to understand and transfer ownership.

Statutory powers for mortgagees and landlords: The Act provides various default powers, such as the power of sale for mortgagees, and implied covenants and conditions for leases.

The right of survivorship in joint tenancies: The Act reaffirms the principle that legal title to property held as joint tenants passes automatically to the survivor on death, which remains a key consideration in both commercial and private property arrangements.

Why It Still Matters in 2025

A hundred years on, the Law of Property Act 1925 remains an essential part of the legal framework governing land and property in England and Wales. It is regularly cited in court decisions and forms the legal basis for many of the rights and responsibilities of property owners, developers, landlords, tenants, and lenders.

At our firm, we continue to rely on its provisions when:

Drafting and reviewing leases

Advising on rights of way or other easements

Registering transfers and charges with HM Land Registry

Handling complex property transactions involving trusts or multiple interests

Advising on enforcement options for mortgage lenders

Looking Ahead

Despite its age, the Law of Property Act 1925 remains remarkably relevant – a testament to the foresight of the legal reformers of the 1920s. While property law has evolved significantly over the past century, especially with the introduction of compulsory land registration, electronic conveyancing, and modern environmental and planning regulations, the Act still provides the foundations.

Introduction

Warranties are a key feature of any share purchase agreement (SPA). They are statements of fact made by the seller about various aspects of the company being sold. These warranties provide the buyer with protection, ensuring that the company they are acquiring is in the state represented by the seller. If any warranty is later found to be untrue, the buyer may have the right to claim damages.

This guide outlines the main types of warranties typically included in an SPA and explains their significance.

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1. Title Warranties

These warranties ensure that the seller has full ownership of the shares being sold and that the shares are free from any encumbrances or third-party claims. They are crucial as they confirm that the seller has the legal right to sell the shares, and the buyer will acquire full ownership of the company.

Typical clauses include:

• The seller is the legal owner of the shares.

• The shares are free from any liens, charges, or other third-party interests.

• The seller has the power and authority to sell the shares.

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2. Accounts Warranties

Accounts warranties provide assurances regarding the financial position of the company as represented in its financial statements. These warranties typically cover the accuracy of the company’s balance sheet, profit and loss account, and cash flow statement. The warranties ensure that the accounts present a true and fair view of the company's financial position.

Key examples include:

• The accounts have been prepared in accordance with applicable accounting standards.

• The accounts give a true and fair view of the company’s financial affairs.

• There are no undisclosed liabilities.

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3. Tax Warranties

Tax warranties cover the company’s tax affairs, ensuring that the company has paid all taxes due and has complied with relevant tax laws. They protect the buyer from hidden tax liabilities that could emerge after the purchase.

Examples of common tax warranties:

• All taxes due have been paid, and there are no outstanding tax liabilities.

• The company has made all necessary tax filings and returns.

• There are no ongoing tax disputes or investigations by tax authorities.

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4. Litigation and Dispute Warranties

Litigation warranties protect the buyer by confirming that there are no current or pending legal disputes involving the company. These warranties ensure that the buyer is not unknowingly acquiring a company facing costly or reputationally damaging litigation.

Key clauses include:

• The company is not involved in any ongoing legal disputes.

• There are no claims or proceedings threatened or pending against the company.

• The company is not in breach of any laws or regulations.

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5. Commercial Contracts Warranties

These warranties provide assurances that the company's commercial contracts with customers, suppliers, and other third parties are valid and enforceable. They also confirm that no material contracts are at risk of being terminated due to the share sale.

Typical warranties in this area might include:

• All material contracts are in full force and effect.

• The company is not in breach of any major contracts.

• No customer or supplier has indicated an intention to terminate or materially alter their contract with the company.

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6. Employment Warranties

Employment warranties provide assurance regarding the company’s workforce, confirming that the company complies with employment laws and has no disputes with its employees. This is especially important if the business has a large workforce or key employees critical to the company’s success.

Key employment warranties may include:

• All employees are employed on legally compliant terms.

• There are no ongoing or pending employment disputes.

• The company has met all obligations concerning pensions, redundancy payments, and other employee benefits.

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7. Intellectual Property (IP) Warranties

These warranties address the ownership and protection of the company’s intellectual property, which may be vital for companies reliant on trademarks, patents, software, or other proprietary rights. IP warranties are designed to ensure the buyer will continue to benefit from the company's IP assets after the purchase.

Examples of IP warranties include:

• The company owns or has valid licences for all necessary intellectual property.

• No IP rights of the company are being infringed, and no third parties are infringing the company’s IP rights.

• The company is not involved in any IP disputes or claims.

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8. Property Warranties

If the company owns or leases real property, property warranties ensure that the company has valid title or leasehold rights over its properties. These warranties also confirm that the properties comply with planning regulations, building codes, and other legal requirements.

Examples of property warranties include:

• The company owns or leases the properties identified in the agreement.

• There are no disputes regarding the company’s ownership or occupation of the properties.

• All properties comply with applicable building regulations and have the necessary planning permissions.

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9. Environmental Warranties

These warranties provide protection against environmental liabilities, such as pollution or non-compliance with environmental laws. Environmental risks can be particularly significant in industries like manufacturing or real estate, and the buyer will want to ensure there are no hidden risks that could lead to fines or remediation costs.

Typical environmental warranties include:

• The company complies with all relevant environmental laws and regulations.

• The company holds all necessary environmental permits.

• There are no known environmental issues, such as contamination, that could give rise to liability.

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10. Compliance Warranties

Compliance warranties confirm that the company has adhered to all applicable laws and regulations, including data protection laws, anti-corruption laws, and competition laws. These warranties protect the buyer from acquiring a company that is in breach of critical legal obligations.

Examples include:

• The company has complied with all applicable laws and regulations.

• The company has not engaged in any unlawful or unethical practices.

• The company holds all necessary licences and permits for its operations.

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Conclusion

Warranties play a vital role in protecting the buyer in a share purchase transaction, offering recourse if the company's condition is not as represented. While this guide covers the main types of warranties typically found in an SPA, each transaction is unique, and warranties can be tailored to the specific circumstances of the deal. Sellers should be aware that giving warranties can expose them to liability, while buyers should ensure that warranties are comprehensive enough to cover all key risks.

2024 marks the 70th anniversary of the Landlord and Tenant Act 1954, a piece of legislation that has had a lasting and significant impact on commercial property law in England and Wales. Though often updated and shaped by case law over the decades, the core principles of the Act remain central to the relationship between commercial landlords and tenants today.

A Brief History

The 1954 Act was passed in the post-war period, at a time when the government was keen to provide greater protection for business tenants. Before the Act came into force, landlords were free to terminate business tenancies on expiry without offering renewal, placing tenants in a precarious position, especially those who had built up goodwill in particular premises.

The 1954 Act sought to redress this imbalance by introducing security of tenure for tenants of business premises—meaning that a qualifying tenant has the right to a new lease on similar terms when the existing one expires, unless the landlord can establish certain statutory grounds for refusing.

Key Features of the 1954 Act

1. Security of Tenure

The most famous aspect of the Act is Part II, which grants tenants the right to remain in occupation and apply to the court for a new lease unless:

The lease was specifically contracted out of the Act, or

The landlord can prove a ground for opposition, such as intending to redevelop the property or occupy it themselves.

2. Grounds for Opposition

There are several statutory grounds under Section 30(1) on which a landlord may oppose renewal. These include tenant default (non-payment, disrepair, or other breaches) as well as landlord-specific reasons such as:

Intention to redevelop (Ground (f))

Intention to occupy the premises themselves (Ground (g))

3. Court Involvement

If renewal is opposed or terms cannot be agreed, the matter may go before the court. The court has the power to determine whether the tenant should be granted a new lease and on what terms, including rent.

4. Contracting Out

Landlords and tenants can agree to "contract out" of the Act, meaning the tenant gives up the right to a new lease at the end of the term. This must be done through a formal notice and declaration process before the lease is entered into.

Why the 1954 Act Still Matters

Despite being 70 years old, the 1954 Act remains a cornerstone of commercial lease law. It provides a structured and balanced framework for lease renewals and terminations, helping to ensure predictability and fairness in landlord and tenant relationships.

That said, the Act is not without its critics. Over the years, there have been calls for reform to simplify its provisions and reflect the modern commercial landscape. The Law Commission and other bodies have periodically reviewed it, but the basic principles have endured.

Common Issues and Practical Tips

Understand Your Lease Status: Both landlords and tenants should know whether a lease is inside or outside the 1954 Act.

Plan Ahead: Notices under the Act (such as Section 25 or Section 26 notices) must be timed and worded carefully—mistakes can be costly.

Get Advice Early: Whether you are renewing a lease or opposing one, early legal advice can help protect your position and avoid disputes.

Looking Ahead

As we mark the 70th anniversary of the Landlord and Tenant Act 1954, its durability is a testament to its importance in striking a fair balance between the rights of commercial landlords and tenants. While the commercial property landscape has evolved significantly since 1954, the Act continues to play a vital role in shaping lease negotiations and resolving disputes.

Whether reforms will eventually replace it with a more modern framework remains to be seen. For now, the 1954 Act continues to underpin a large part of commercial property practice—and deserves recognition as a landmark piece of legislation.

The Landlord and Tenant Act 1954 plays a pivotal role in commercial property law in England and Wales, especially when it comes to the security of tenure for business tenants. For businesses occupying commercial premises, the concept of "security of tenure" provides stability, allowing them to remain in their premises beyond the expiration of their lease, provided certain conditions are met. This article breaks down the key provisions of the Act and what they mean for both landlords and tenants.

What is Security of Tenure?

Security of tenure refers to the right of tenants using a property for business purposes to continue their occupation even after the lease term has expired. This right is enshrined in the Landlord and Tenant Act 1954 and is designed to give tenants continuity in their business operations. While the Act offers significant protection to tenants, it also sets out specific grounds upon which a landlord can oppose the renewal of the lease.

The security of tenure provision is vital for businesses as it allows them to negotiate the terms of a new lease instead of vacating the premises at the end of their current tenancy. For landlords, this can be seen as a limitation, as they cannot simply take back their property when a lease ends unless they have legitimate reasons.

Key Provisions of the Act

The Act, specifically Part I, deals with business tenancies, and under Section 24, business leases do not automatically end when the agreed term expires. Instead, tenants have the right to renew unless certain steps are taken by the landlord or tenant to terminate the lease.

Lease Continuation

The business tenancy continues until either party serves a statutory notice under the Act. The landlord may issue a Section 25 notice either offering a new lease or opposing the renewal based on specific grounds, while the tenant can serve a Section 26 notice requesting a new lease.

Grounds for Opposition

A landlord can oppose a lease renewal only on limited grounds, as specified in Section 30 of the Act. These include the tenant’s failure to meet their obligations under the lease, such as delayed rent payments or failure to carry out repairs. The landlord may also oppose renewal if they intend to redevelop the property or use it for their purposes.

Lease Renewal Process

If the landlord and tenant cannot agree on the terms of a new lease, the matter can be referred to the court. The court will assess factors such as comparable market leases and the specific circumstances of the parties involved to determine fair terms for the lease renew

The Impact on Landlords and Tenants

For tenants, security of tenure offers protection from displacement, allowing them to plan for the long term and make investments in the premises. This is particularly important for small and medium-sized businesses that may be more vulnerable in a competitive commercial property market. Without the right to renew a lease, a business could be forced to relocate, disrupting operations and potentially losing customers.

For landlords, the Act can be more restrictive. While it ensures a stable relationship with the tenant, it limits the landlord’s ability to regain possession of the property for their own use or redevelopment without going through a formal process. The Act's provisions aim to strike a balance between giving tenants security and ensuring landlords can regain control of their property under justified circumstances.

Opting Out of Security of Tenure

One of the most flexible elements of the Act is the ability for landlords and tenants to agree to "contract out" of the security of tenure provisions. This option can be appealing in situations where both parties prefer not to be bound by the automatic right to lease renewal, such as in short-term leases or when the landlord has redevelopment plans.

Procedure for Contracting Out

The contracting-out process is highly regulated to ensure that tenants fully understand the rights they are giving up. Before entering into a contracted-out lease, the landlord must issue a formal warning notice, and the tenant must sign a declaration acknowledging that they understand and accept the exclusion of security of tenure.

Implications

While contracting out gives the landlord more control over the property at the end of the lease, it also means tenants lose the right to remain in the property after the lease expires. For tenants, it may offer leverage in negotiating other favorable lease terms, such as reduced rent. However, businesses must carefully consider the long-term implications, as losing the automatic right to renew can affect their ability to remain in the premises.

The Importance of Legal Advice

Both landlords and tenants must approach the issue of security of tenure with careful consideration. Whether negotiating a lease renewal or deciding to contract out of the Act, it is crucial to seek professional legal advice to understand the full implications. For landlords, this may involve balancing their desire for control over the property with the benefits of a stable, long-term tenant. For tenants, understanding their rights under the Act is key to ensuring that they can continue operating their business without disruption.

Conclusion

The Landlord and Tenant Act 1954 remains a cornerstone of commercial property law, providing essential protections for business tenants through the security of tenure provisions. While these protections offer significant advantages to tenants, particularly in a competitive market, they also place restrictions on landlords' ability to regain possession of their property. The ability to contract out of these provisions offers flexibility but requires careful consideration and legal guidance to ensure both parties' interests are adequately protected.

Whether you are a landlord or a tenant, understanding the implications of the Landlord and Tenant Act 1954 is crucial in navigating the commercial leasing landscape in England and Wales. With the right advice, both parties can make informed decisions that support their business objectives.

This article aims to provide a clear overview of security of tenure under the Landlord and Tenant Act 1954, helping visitors to your website understand its significance and the importance of informed decision-making when entering into or renewing a commercial lease.



This article aims to provide a clear overview of security of tenure under the Landlord and Tenant Act 1954, helping visitors to your website understand its significance and the importance of informed decision-making when entering into or renewing a commercial lease.