Execution of a business or share sale agreement does not always guarantee settlement. Many SME transactions still depend on approvals from third parties who are not parties to the sale agreement. A landlord may need to consent to a lease assignment, a financier may need to release security, or a customer, supplier, franchisor or regulator may need to approve an assignment or change of control.

These requirements create two related risks. A third party may delay or refuse its consent, or the sale agreement may fail to explain what happens if a condition remains unsatisfied.

Two recent Supreme Court decisions illustrate why parties need to manage both risks before signing.

When a third party refuses consent

For a business that operates from leased premises, landlord consent can determine whether the buyer acquires a business it can actually operate. The consent process may also affect the buyer’s finance, particularly where its lender requires security over the lease.

In Watski Pty Ltd v Roughstone Pty Ltd [2026] NSWSC 614 (Watski), Watski agreed to sell its caravan park business to an experienced caravan park operator. Settlement depended on the landlord consenting to the transfer of the lease, and the buyer also required the landlord’s consent to grant a mortgage over the lease as security for its acquisition finance. The landlord gave neither consent.

The NSW Supreme Court found that the landlord had unreasonably withheld consent. The proposed buyer had relevant experience and support from a reputable lender, and nothing before the Court disclosed a proper basis for refusing the lease transfer or mortgage. The Court ordered the landlord to execute the necessary documents.

Watski illustrates that, where legislation or the lease prevents a landlord from unreasonably withholding consent, the landlord cannot refuse consent without a proper basis. The applicable requirements depend on the jurisdiction, the type of lease and its terms.

When the contract provides no clear solution

A transaction can also stall without any unreasonable third-party conduct. If the agreement does not identify who benefits from a condition or what happens when the condition remains unsatisfied, the parties may have no clear path to settlement.

In Saltworks Investments FS Pty Ltd v Tueno Investments Pty Ltd [2026] VSC 466 (Saltworks), a property sale and long-term leaseback supporting a childcare business depended on the vendor obtaining a planning permit and the parties finalising the lease documents. Saltworks illustrates the risk of assuming that a purchaser can waive an outstanding condition and compel settlement. The conditions also protected the vendor’s leaseback interests, and the final contract’s entire agreement clause prevented the purchaser from relying on the sole-benefit wording in the earlier heads of agreement.

Although this case concerned a property sale and leaseback, its reasoning applies more broadly to business sale agreements. The parties should identify who benefits from each condition, who may waive it, when the parties must satisfy it and what follows if they do not.

Practical implications

SME owners can reduce consent and settlement risk by taking five key steps:

1. Identify approvals early: Review leases, finance documents, material contracts, franchise agreements and licences for assignment, novation and change-of-control requirements.
2. Prioritise essential consents: Make consent a condition precedent where the buyer cannot occupy the premises, obtain finance, retain a key contract or operate the business without it.
3. Draft conditions clearly: Identify who must seek each approval, the steps and level of effort required, who benefits from each condition, who may waive it, the deadline and the consequences of non-satisfaction.
4. Provide a clear fallback: Specify how to calculate the settlement date once the parties satisfy or validly waive the relevant conditions. Include a long-stop date and explain who may extend that date or terminate, and what happens to deposits, costs and accrued rights if a condition remains unsatisfied.
5. Begin the consent process promptly: Give the third party sufficient information about the buyer and keep a written record of all requests, responses and delays.

The central lesson from both cases is that parties must manage consent risk through both a structured approval process and precise contractual drafting.

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