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One of the key issues to consider at the start of a business sale is whether the assets of the business, or all the shares in the company  will be sold. These two methods may have significant implications for each of the Seller and the Buyer and should be considered by both parties when structuring the transaction.

Asset sale or share sale?

If the business is run by a sole trader or a partnership then there will be no shares to buy. The assets, including contracts and goodwill of the business, will be sold  in an asset sale.  However, if the business is a limited company, then the Buyer can choose whether to buy the assets or the whole of the company itself.

Broadly speaking, a Buyer will normally prefer an asset sale, and Seller will normally prefer a share sale.  The following article will explain a few of the reasons why.

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 Asset sale

Under an asset sale, the Buyer acquires some or all of the assets owned by the Seller.  The Buyer will generally prefer to buy the assets  of a company, as this will enable them to cherry pick exactly which assets they are buying and identify precisely those liabilities they wish to take over, giving the Buyer a great degree of flexibility.  The Seller’s business name may or may not be included in the sale and the licences and contracts may or may not be transferred to the Buyer,depending on the terms agreed.  All other liabilities will be left with the Seller, meaning that the Buyer does not have to take over liabilities that they wish to avoid.  The Buyer therefore potentially takes on less risk.

One asset that cannot be cherry picked by the Buyer in an asset sale is the existing employees of the business.   All employees automatically transfer on their existing terms and become the responsibility of the Buyer who must consult with the employees prior to completion.

If an asset sale involves property or land then the Buyer will be faced with paying Stamp Duty Land Tax at a rate of anything up to 4% of the price attributed to that particular asset.  If the asset sale is deemed as a transfer of a going concern, then it is deemed to be outside the scope of VAT.  The Buyer may be able to claim Capital Allowances for the price paid for equipment and industrial buildings.

Share sale

Under a share sale, the Seller is the  individual shareholders of the company.  The Buyer acquires all the shares in the company and indirectly obtains ownership of all assets and all liabilities.

The Buyer steps into the shoes of the Seller as shareholder.  The contracts and assets remain in the company’s ownership. There is therefore no need for the assets of the company to be transferred and this means a share sale can often be completed without any third-party involvement making it far more discreet.  When a Seller sells shares in a company they achieve a complete break in the relationship between themselves as shareholders and the company.   Assuming the Seller has not given personal guarantees, they will not have liability for the debts of the business following completion as they will remain with the Company.  As the Buyer indirectly assumes all of the of the company liabilities(whether known or unknown),they are generally at greater risk in a share sale.

The Buyer in a share sale is not restricted with how they can deal with employees in the same way that they are under an asset sale.   They can potentially change terms of employment and take other measures if they are necessary

Tax wise in a share sale, a Buyer must pay stamp duty of ½ % of the price paid for the shares.  Share purchases are entirely exempt from VAT.  A Seller is likely to prefer a share sale as the tax implications are generally more favourable than an asset sale,as they may be entitled to a relief of 50% on the Capital Gains Tax payable on the sale of the shares.

Whether the transaction is structured as an asset sale or a share sale, it is essential to obtain independent legal, tax and accounting advice so that the parties understand the implications of the transaction.  For specialist legal advice, contact Luke Rees or a member of the Commercial Department at Fidler & Pepper on 01623 451111.







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Simply put, a Shareholders Agreement is a document that every company with more than one shareholder should have. It contains the rules by which the shareholders agree to operate the company and in general terms provides the basis of a legal agreement between them.  Shareholders Agreements ensure that the running of the company and the responsibilities of the shareholders are properly clarified so there is certainty as to what can or cannot be done and decisions are taken by consensus and discussion.  As a result, having a Shareholder’s Agreement in place is more likely to reduce the potential for conflict between shareholders and this will help the company to be run smoothly and profitably.

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So why have a Shareholder’s agreement?

A Shareholders Agreement works in conjunction with a company’s articles of association, but will give shareholders greater protection than can be provided by the articles alone, not least because companies are often set up quickly and cheaply just with standard articles that will not include much detail regarding protective provisions for shareholders or define the limits of their responsibilities..

Ordinarily a company is subject to control in accordance with the Companies Act that governs how a company should be run.  However, a Shareholders’ Agreement can contain any arrangement agreed between the shareholders and can vary what would otherwise be the legal position without it.

A Shareholders Agreement is a cheap way to minimise any potential for business disputes between shareholders by making it clear how certain decisions are made and also by providing a framework and procedures for dispute resolution. Common sense and tolerance may not be enough to end a dispute where a specific action is called for. A Shareholders Agreement will force an end to a dispute, by providing a structure within which the parties have to abide. In the event of a stalemate situation a Shareholders Agreement will provide a procedure to allow the parties to go their own ways.

A Shareholders Agreement  can make provision for what happens in the event that a shareholder’s personal circumstances change to safeguard the remaining shareholder’s financial interest in the company in the event that a fellow shareholder dies or wishes to leave/retire.   A common provision in a Shareholder’s Agreement is a right of pre-emption, or first refusal. This means that if a shareholder should die or wish to exit, their   is offered to the remaining shareholder’s who have a specified time period in which to make an offer for the shares.  It is only in the event that the remaining shareholders do not wish to exercise their right of first refusal that the departing shareholder’s shares may be offered and sold to a third party.  Needless to say, this is an extremely important provision as it ensures that the remaining shareholders do not have an unwelcome new partner forced upon them!

Shareholders Agreements can control minority shareholder by placing restrictions on them if they leave the company and compelling them to transfer their shares in certain circumstances such as when the majority wish to sell the company to a third party.   A Shareholders Agreement can also protect the rights of minority shareholders and the investment value of their share holding.  Without an agreement, majority shareholders may force issues that are not in the minority shareholders’ interests.  Once in place a Shareholders Agreement can only be amended with the agreement of all of the shareholders, whereas the company’s articles of association can be changed by a 75% majority meaning that a shareholders agreement provides better protection for minority shareholders.

If you require a Shareholders Agreement for your company, call Luke Rees a solicitor in our commercial team on 01623 451111 for a fixed fee quote.

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Most leaseholders of flats in England and Wales have a legal right to  purchase at market value a new lease at a peppercorn (i.e. nil) ground rent within deadlines laid down by law.  A leaseholder who has lived in their flat for two years and has a lease with a term of over 21 years remaining is entitled to negotiate a new 90-year lease extension on top of the existing unexpired term.

For a leaseholder, acquiring a lease extension is an important way to protect the value of your flat.   With any lease, the length of time left to run has a major impact on the value. If the lease has only a few years left then its value drops dramatically as any purchaser will not be willing to part with a lot of money in return for only a short period of ownership. Extending the lease increases the value.

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It is important if you are selling your lease to widen the market for the property. The problem with short leases is that prospective buyers will struggle to find a mortgage if the term is not long enough. Extending the lease increases the market for its purchase.

A lease extension can be used  to correct any defects or problems that the lease may have. If for example the flat is held under a lease that was created many years ago then it is possible for some of the clauses to be redundant or irrelevant. The new lease can be drafted in a modern manner and benefit both the leaseholder and landlord.

The law puts the leaseholder in the driving seat as the leaseholder can start off the statutory extension process by serving a notice on the landlord.  The notice must contain certain specified information, such as a proposed price for the lease extension.  This price must be reasonable and so it will be necessary for the leaseholder to obtain a valuation from a suitably qualified surveyor.  The statutory procedure sets out a formula for calculating the value of a lease extension.   The leaseholder is responsible for paying the landlord’s costs of the extension and may be required by the landlord to pay a deposit of 10% of the proposed premium.

The landlord has two months to issue a counter notice confirming whether they admit the leaseholder’s request for an extension and what terms the landlord wishes to negotiate (usually the price!).  A period of six months is set aside for the landlord and leaseholder to agree terms and within two months of these terms being agreed, the new lease extension must be entered into. Once the process has been started, the right to acquire the lease extension can be transferred by the seller to the buyer upon completion of the purchase of a flat.

The statutory procedure for lease extensions provides a clear and certain process for both leaseholder’s and landlords to follow.  However, the process is very strict with regards to the information that must be supplied and the time limits that must be followed and so consequently there are a number of potential traps and pitfalls along the way.  Whether you are a leaseholder seeking to extend your lease or a landlord faced with a notice of extension, we can help you.  Contact a member of our commercial team for further advice on 01623 451111.

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Lease enfranchisement


What is it?


When you buy a leasehold property you own the leasehold title but a third party owns the freehold title. Lease enfranchisement allows the leaseholder owner to acquire the freehold.


Why would you want to acquire the freehold?


If you own the freehold it allows you to:-


1. grant lease extensions yourself;

2. control the management of the building  and

3. if the lease needs variation etc then this allows you the freedom to do so.


Can I apply? 


To qualify to apply for enfranchisement the following must be satisfied:-


1.there must be at least two flats in the building;

2. at least 2/3 of the flats, must be let to “qualifying tenants”


What is a qualifying tenant?


1. the lease must be for 21 years or more (certain other leases do qualify);

2. at least 50% of the flat must join in the application, if there are only twp flats both must participate;


What is the procedure?


There is a set procedure for the application starting with the tenant serving a notice with required information on the freeholder. I would suggest that a solicitor be involved at this stage to ensure that the procedure is followed.


What will the tenant have to pay?


1.Usually the tenant will have to pay certain fees of the freeholder and

2. the purchase price for the freehold the price depends on a number of factors such as the length of the leases and the value of the flats. If the lease term is over 80 years less value will need to be paid.


If you require any assistance with such an application Fidler and Pepper have a specialist team who handle such cases and we would be happy to provide you with a quote for the work. Please call Christie on 01623 448302 for further information

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A lease is a contract between the landlord and tenant. Like all contracts, it is negotiable. A tenant should understand the basic lease terms before entering into negotiations to take on a new lease.  As the tenant, you are likely to find yourself negotiating the lease with an agent, rather than the landlord himself. Whilst you might think that the agent is neutral, they are in fact paid to market the premises for the landlord and to negotiate the best deal for them, not for you.

The savvy operators will always speak to a solicitor early on in the process to ensure that negotiations are strategically considered.  Usually, after an agreement in principle has been made, the agent drafts a ‘heads of terms’ document (often referred to as the ‘HoTs’). This details the principal terms and is circulated to solicitors as the starting point for them to draft the legal documentation.

The following is a list of the main commercial terms that you will need to agree as part of the HoTs:

Duration of the lease

Leases of commercial premises nowadays seldom run for longer than 10 years.  Tenants should usually expect to have the right to end the lease early (a break clause) in leases of 6 years or longer.  A break clause gives you as a tenant the vital flexibility of being able to terminate the lease early.  It is also an easier way out of a lease than trying to sell it on or subletting.   Usually, when negotiating a break clause, the landlord will want to insist it is mutual i.e. the landlord can serve notice to break the lease as well as you.   You should try to resist this if at all possible as obviously you do not want the landlord threatening to break the lease if your business is doing well!

You may hear or see reference in the HoTs to the lease being ‘excluded from the protection of the Landlord and Tenant Act 1954 (the “Act”)’. The Act gives business tenants the right to renew a tenancy when it comes to an end. If the landlord refuses to allow for the lease to be automatically renewable you may want to consider a longer lease term.


To get an idea of what a fair rent is for the premises, you should find out an average rent for other similar properties in the area. Often there is more payable than just the basic rent – including, building insurance, utility costs and so on. You should also check if the landlord has opted to charge VAT on the rent as this will inflate the rental figure you actually pay in real terms.

Leases for a term longer than 5 years normally contain rent review clauses which allow the Landlord to initiate a review of the rent at set intervals.  Landlords normally stipulate that rent reviews should be upward only so do not expect your rent to go down!   It goes without saying that the longer the interval between rent reviews the better as your rent will remain stable.

It may be that you want to make changes to the premises to fit them out for your particular use.  In such circumstances you should ask the landlord for a rent free period in order to compensate you for the time and costs of  making  changes.  Rent  free periods  are common in the current market and will improve your cash flow.

Another issue you will need to consider when negotiating the lease term and rent is stamp duty land tax (SDLT). SDLT on leases involves a complex calculation and the amount payable (if any) will vary according to the length of the lease term and the amount of rent. One way of reducing SDLT liability is to take a shorter lease term.

Service charge

If the premises form part of a larger building, the landlord may also charge a service charge.  A service charge covers the costs of maintaining and repairing the shared areas of the larger building.  So that you can get an idea of your likely financial obligations under the service charge you should ask the landlord to estimate the average year’s service charge,how this is calculated for the premises and to confirm the service charge for each of the last three years.   If there is a service charge,  you should request that it is capped to avoid a very nasty shock when the landlord asks you for your share of the cost of something significant such as replacing the roof!


Being liable for repairs can be very onerous for a tenant. You do not want to find yourself responsible for extensive repairs way out of proportion to the length of time you will be renting the premises. You should, therefore, negotiate repairing obligations which are appropriate to the term of the lease and, significantly, the condition of the premises.  If the premises are in anything other than a perfect condition, you should insist that a survey called a schedule of condition is undertaken.   A schedule of condition is a record of the condition of the premises at the start of the Lease and it can be made  clear that you do not have to put the property into any better state of repair then it was at the start of the Lease as evidenced by the schedule.


A tenant usually likes to be able to deal with their rented premises in the most cost-effective way, even if this means subletting or selling (assigning) the lease – in legal terms, ‘alienating’ the property. Landlords, on the other hand, prefer to exercise fairly strict control over alienation, by seeking a guarantee that any assignee or sub-tenant will be able to pay the rent and perform the tenant’s obligations.


Another area landlords like to control is when structural or other alterations to the premises are to be carried out by the tenant. A normal clause in the lease would state that any such alterations will require the prior written consent of the landlord, but that consent should not be unreasonably withheld or delayed. To save time and costs in the future you should get all signage and initial alterations that you wish to make approved before signing the lease. If you wait until after the lease has been completed, you may be required to complete a formal licence and pay the landlord’s legal and surveyor’s fees.

Other terms

There are many other terms in a commercial lease.   It is far more difficult to renegotiate terms at a later stage than at the time when both landlord and tenant are keen to secure the deal. Make sure you obtain professional advice at the outset, in order to avoid committing yourself to a lease that could unduly restrict you and drain your finances.

One final piece of advice is that the agent may request that you pay the landlord’s legal costs  in connection with the lease.  It is not standard practice for the tenant to pay the landlord’s costs and so do not agree to this.  You may have your own legal costs to pay and it is only fair and reasonable that the landlord pays their own bill!!

For further advice or a quote, please contact  a member of the commercial team on 01623 451111



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No it’s not a reference to that fantastic rock track by Rush (always worth a listen to it though).

More your common or garden tree that starts off a lovely sapling and ends up a towering monster.large tree

Now I’m all for trees but if you are a property owner you can have a love/hate relationship with them.

And tree disputes are a real problem for some property owners, often enough for it to make a case go all the way  to the Court of Appeal.

And I am guessing that’s how Mrs Robbins felt as well.

Her  house was next to a local authority park.

There was a row of poplar trees in the park, approximately 30 metres from an extension to the rear of the house.

A neighbour had made a claim in 1996/97 for subsidence damage caused by the trees.

As a result the Authority had  carried out works  in 1998 to reduce the crowns of the trees and also planned to do other works  in the future which were never carried out.

Mrs R  brought proceedings in 2009 for damage sustained to the foundations of the rear extension in 2003 and 2006.

The judge  hearing the case at first hand held that tree roots were responsible, as they had drawn water from the soil under and around the foundations for Mrs R’s property.

Strangely  the Judge said that, even though the works were not done since 1998, had the programmed works been done he  found the damage would still have happened.

So what did the Council do wrong – you can hear them still asking themselves that.

The Council  appealed saying  the judge :

(i)   had applied the correct causation test when holding that the local authority was liable for the damage, given his finding that the reduction programme would have had no effect;

(ii)  was right to use his finding that very severe reduction would probably have been undertaken had the 2006 work been done earlier to hold that the damage would have been avoided had the local authority done the work it should have;

(iii)  was right to infer that hypothetical contractors undertaking reduction in 2002 to 2006 would have gone beyond their instructions and effected a greater than 25 per cent reduction, as the actual contractors had in September 2006;

(iv) was right to hold that the 2003 damage would have been avoided by a three or four yearly 25 per cent reduction started in 1998.

The Court of Appeal dealt with the case and decided that

1) and 2) together.

The first and second issues could be dealt with together. The logic of the local authority’s first ground was appealing but it was important to first identify the local authority’s duty and the breaches of that duty held to have been established.

They said that  the duty was, from 1998, to take such steps as were reasonably required to prevent damage being caused to Mrs  R’s property by the tree roots.

The duty was not necessarily to undertake any specific programme of works.

The works referred to by the judge were simply possible ways in which the duty could have been discharged.

The breach of duty held to have been established was the failure to take reasonable steps to put in place, and carry out, a programme of reduction from 1998 onwards.

Having held that the damage was foreseeable, the previous Court  held that it would have been reasonable for the local authority to have acted in that way.

Taking that all together, the local authority’s arguments on the  first and second grounds were irrelevant;  the judge plainly found that the failure to put in place any programme of cyclical pruning was responsible for the damage in 2003 and 2006.

As the local authority had done absolutely nothing between 1998 and 2006, that was not a surprising conclusion.

However, with regard to the alleged failure to apply the proper causation test, the breach of duty was in not doing anything.

The judge was justified on the facts, and as a matter of the proper application of the rules of causation, in asking what the local authority would in fact have done had it taken reasonable steps to prevent the damage.

The local authority’s error was in assuming the judge had found that its duty was simply to undertake a particular 25 per cent reduction programme, and that its breach was its failure to undertake such a regime.

The Court of Appeal said the original Judge was spot on and could not be criticised

(3) The judge having heard the evidence  was perfectly justified in inferring that, if the reduction works had taken place from 1998 onwards, they would, on a balance of probabilities, have been undertaken more severely than the later works orders envisaged

(4) The judge was also entitled to find that the breach of duty established had caused the 2003 damage.

So after all of that the Council were at fault and Mrs R could get compensation of the damage done.

What seems to have scuppered the Council here was that they did all the hard work of  doing their risk assessments and planning but simply didn’t carry it into place in the future, and had they done that, they would have realised they would have needed to do more as things went on.

An expensive  mistake at the end of the day but a happy ending for Mrs R.

If you need any help about  damage to your property or house then please call Russell Jones or the  dispute team on 01623 451111





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New rules (The Civil Procedure (Amendment No. 4) Rules 2013 (SI 2013/1412)) came into effect on the 1 July 2013. This will be great news for developers as it means that the time limit for judicial review applications in respect of planning has been reduced from 3 months to  6 weeks.

No doubt developers will be very happy with the reduction in time limits but this is not great news for the party wanting to make the application for judicial review. Will 6 weeks be sufficient time for them to get their application together and lodged?  

 Christie Limb (climb@fidler.co.uk)


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There is a good chance that with older properties they will be subject to a rent of £1. The lease may be 100 year old and have not been increased since this time. Nowadays, these small rents are not collected and the freehold title may not even be registered.

Generally when purchasing such properties you would ensure that 6 years worth of rent on the assumption that this would be available to pay the Landlord if they ever materialised.

Other considerations should be that that the vendor should provide insurance as he could not provide anything better than good leasehold title and the Landlord may be absent. 

You should also consider whether any alterations have been carried out to the property. Whilst Planning and Building Regulation may have been complied with, consent under the lease may not have been obtained.  Once again insurance may need to be called upon.

If you are selling commercial leasehold property similar to the above then this may add to your costs as part of the sale.  There is an argument to call upon old covenants which are not protected by registration with the Land Registry to be abolished. Unfortunately this is not the current situation and we are left with the problems that come from these situations.

If  you need any advice in relation to the above please drop us a line at Fidler & Pepper or contact our commercial department directly.

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It is very important when you decide to exercise a break notice that the terms of the lease are fully complied with. The lease may often require the notice to be served subject to precise break dates or subject other requirements.  Saying that in a recent case Siemens Hearing instruments Ltd v Friends Life Ltd (2013) EWHC (ChD) the High Court held that a notice purporting to exercise a lease break was effective even though the notice did not follow the requirements of the lease.

In this case the lease stated that the break notice “must be expressed to be given under section 24 (2) of the Landlord and Tenant Act 1954. The tenant served the notice but did not state in the notice that it was given under section 24 (2) of the Landlord and Tenant Act 1954. The landlord claimed that the break notice had not been served correctly. The High Court decided that the break notice was valid even though it failed to comply with one of the requirements of the lease.

It was suggested that when a break notice is served there are three possible outcomes:-
1. the requirement of the break notice is mandatory and failing to comply with such will be fatal;

2. that the requirements is “directory’ . Failure to meet this requirements may have adverse consequences but does not invalidate the notice?

3. that the non compliance has to be assessed whether there has been adequate compliance and does the non -compliance make a difference to the other party?

The recent case may provide some comfort to anyone serving a notice as in this case the courts stated that the notice was valid even though it did not comply with every requirement of the break clause.  Even with this anyone serving a notice needs to read the lease terms carefully as it would have been much better in this case for the notice to have been served in strict compliance with the terms of the break clause so that the expensive legal proceedings could have been avoided.

In summary please ensure that whenever you are serving a break notice that the terms of the break clause are strictly complied with.

If you do have any questions on break clauses I would be happy to assist with your enquiries please feel free to email me on climb@fidler.co.uk or call on my direct dial 01623 448302.

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Some may argue that there is an implied right for the landlord to enter to carry out repairs arising from the tenants duty to keep the property in repair. On the flip side others may argue that there is no such implied right even if the tenant is in breach, in these circumstances the landlord would need to apply to the courts to enforce the tenants covenant to repair. If the landlord gets it wrong and enters when they have no right to do so they could commit trespass and be sued for damages by the  tenant.

For the landlord the best option is to ensure that the lease reserves the right of entry for repairs including details of how much notice is required and providing immediate access in the case of emergencies and if the tenants fails to carry out repairs that the landlord takes legal advice on such.

It would always recommend that a solicitor is appointed to draft the lease.

If you do wish to instruct a solicitor i would be happy to provide you with a fixed fee quote for the work please contact me on 01623 448302 (direct dial) or climb@fidler.co.uk.

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