A sale and leaseback agreement is where a business looks to sell a building it both owns and occupies, while entering into a lease agreement with a buyer of the building. In other words, the owner sells the property to a property investor, who immediately becomes his landlord.
A sale and leaseback can be beneficial for both the buyer and seller alike, as the seller is able to receive a lump sum of cash quickly, and the buyer acquires a lower-than-market value purchase price, along with a long-term lease at an attractive yield. But, like most things in life, there are several advantages and disadvantages of a sale and leaseback.
Sale and leasebacks are usually an alternative to standard bank financing as they allow the owner/occupier of the property to free up capital that has been invested in real estate, and use the monies raised toward other more profitable and immediate uses.
There are several advantages and disadvantages of sale and leaseback deals as a result, each pro and con should be considered carefully, to ensure you are making the correct decision for your business and commercial property.
With a myriad of tax legislation surrounding this point, by speaking to an expert prior to your considering a sale and leaseback arrangement in order to ensure that any reliefs are taken into account and also that you are fully aware of the pros and cons of undertaking such a transaction, giving you an informed view of your position and aiding your decision making process.