Answers · Sale & leaseback risks
What are the risks of a sale and leaseback?
Direct answer
The main risks of a sale and leaseback are committing your business to an ongoing rent obligation for the lease term, being bound by the specific lease terms you agree, depending on the counterparty behaving fairly at reviews and renewals, and giving up any future capital growth on the property. Each is real, but manageable through the terms and the choice of buyer.
Unlike ownership, a lease is a recurring commitment — the rent falls due whether trading conditions are strong or weak, so it's worth being realistic about affordability through a full cycle, not just at signing. The lease terms themselves (length, review mechanism, outgoings, make-good) then determine how predictable and fair that ongoing cost will be over time.
The biggest variable is the counterparty. A trader or short-hold buyer may run reviews aggressively, defer maintenance, or sell the building on to someone less aligned with your tenancy; a permanent-hold owner has every incentive to keep the relationship and the building working well for the long term, because that's the return they're actually seeking. The third honest risk is opportunity cost — if the property goes on to appreciate substantially, that upside now belongs to the buyer, not you.
These risks are mitigated less by avoiding a leaseback altogether and more by getting the lease terms right up front and choosing a long-term, aligned counterparty rather than the first offer on the table. This is general information, not financial advice — weigh the trade-offs against your own circumstances.
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