Business: What 'buy now, pay later' deals have to offer

Deferred consideration is a term quite commonly used in the nursery buying and selling market – but what exactly does this mean?

Essentially it relates to an offer on a nursery, where a buyer agrees to pay a percentage of the asking price initially, with the rest to be paid at a later date. For example, where a purchase price is £500,000, the buyer may agree to pay £300,000 with the remaining £200,000 to be paid two years after the completion date. That £200,000 is known as ‘deferred consideration’.

So, why might a buyer want a deferred consideration? In this economic climate, buyers maybe struggling to secure finance with a bank. Deferred consideration bypasses the need for bank funding and buyers get an interest-free loan. A buyer would also have a level of comfort in not paying the whole amount for the nursery upfront so if any breach of warranty issues arose, the buyer could hold back payment from the amount of deferred consideration owed (known as set-off). A seller would only be ‘set off’ if the claim had been determined and agreed under an arbitral award. Without any deferred consideration, if there were a breach of warranty, enforcement of such a warranty claim would need to be made. The seller could have spent the sale proceeds, which could possibly thwart enforceability.