In a business takeover, how can landlords in Singapore protect themselves?
More commercial establishments are closing this year, with many attempting to sell their operations first
Commercial establishments in Singapore are shutting down at an increasing rate, with over 38,000 closures reported in the first seven months of the year. This trend continues a record-breaking 2025, surpassing even the 42,463 closures during the 2020 Covid-19 pandemic. Many small businesses typically attempt to sell their operations before closing, but such live business takeovers can pose risks for landlords and other parties involved.
Lawyers advise reviewing the lease agreement, especially focusing on the trade the premises can be used for. A landlord may refuse to assign the tenancy to the buyer due to the "privity of contract" rule, which means only parties to a contract can enforce their rights under it. However, if a buyer takes over assets and operations, they cannot legally take action against the landlord, who can object to the takeover or remove the new buyer.
If fraudulent intentions are suspected, the landlord may seek recourse against the original lessee, but the situation becomes complicated if the lessee signs the lease under a sister company that is difficult to act against when the former becomes insolvent. Under Singapore company law, the Insolvency, Restructuring and Dissolution Act 2018 provides a mechanism to reverse undervalued transactions when a company is wound up.
However, landlords may join the queue of creditors and recover only a portion of what is owed. Some leases may extend rights and obligations to more than the direct landlord and tenant, so landlords often take preventive measures, such as requiring a financially stronger parent or sister company as the lessee or securing a guarantee in their favor.
Written by urgent.news from The Business Times - Singapore's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
