Business Property Lease Issue
Discussion
Very long story as short as possible sorry!
I purchased 50% of a company in 2007. As part of the "hand over period" the company paid a lease to the old owners (my in laws) for a period of 3 years.
In 2010 I purchased the remaining 50% of the company. Old owners retired. Part of the deal was the lease for the property that the business resides in was to continue.
Lease was at market rate for a period of 5 years starting mid 2010.
When we set up the agreement we agreed terms verbally over the course of a few meetings, after all it was family (I know I know).
The basis of the agreement was set out in a document, the terms which were some minor things like they could store property on site - just some minor things - they have exercised these options for info. The payment terms etc were detailed. Basically all nice as pie we were family there were no issues.
One other clause was at the end of the 5 years we had the option to buy the property at market value rather than "renew" the "lease". Again its in the document which set out the "terms".
It was discussed and I made it clear that the business would want to buy after 5 years as we wanted to build the business at this location for the long term. They were happy and it was included in the document.
After 3 years we wanted to make some changes to the building as we were growing and we were starting to plan for the long term - they granted permission to carry out the work. A reasonable sum of money was spent.
Around the 4 year mark I started to discuss the end of the agreement was approaching and we would need to sit down to discuss the purchase.
I was surprised that they were not really willing to sell and they wanted us to continue renting it. Eyebrows were raised and I had further discussions with them over a couple of months to the point where they agreed to a meeting with the accountant to discuss.
A couple of months later there was a falling out between family and words were had (separate issue).
In the mean time I have obtained a valuation on the property and had 2 further discussions with them.
They are now saying due to the falling out they are not willing to sell.
I get the feeling they already have another tenant lined up.
I have known these people for 20 years and I really did not expect this. I don't really know what my options are. I would guess my options are limited.
Can anyone offer some advice on what would be a reasonable course of action?
Sorry for the waffle!
I purchased 50% of a company in 2007. As part of the "hand over period" the company paid a lease to the old owners (my in laws) for a period of 3 years.
In 2010 I purchased the remaining 50% of the company. Old owners retired. Part of the deal was the lease for the property that the business resides in was to continue.
Lease was at market rate for a period of 5 years starting mid 2010.
When we set up the agreement we agreed terms verbally over the course of a few meetings, after all it was family (I know I know).
The basis of the agreement was set out in a document, the terms which were some minor things like they could store property on site - just some minor things - they have exercised these options for info. The payment terms etc were detailed. Basically all nice as pie we were family there were no issues.
One other clause was at the end of the 5 years we had the option to buy the property at market value rather than "renew" the "lease". Again its in the document which set out the "terms".
It was discussed and I made it clear that the business would want to buy after 5 years as we wanted to build the business at this location for the long term. They were happy and it was included in the document.
After 3 years we wanted to make some changes to the building as we were growing and we were starting to plan for the long term - they granted permission to carry out the work. A reasonable sum of money was spent.
Around the 4 year mark I started to discuss the end of the agreement was approaching and we would need to sit down to discuss the purchase.
I was surprised that they were not really willing to sell and they wanted us to continue renting it. Eyebrows were raised and I had further discussions with them over a couple of months to the point where they agreed to a meeting with the accountant to discuss.
A couple of months later there was a falling out between family and words were had (separate issue).
In the mean time I have obtained a valuation on the property and had 2 further discussions with them.
They are now saying due to the falling out they are not willing to sell.
I get the feeling they already have another tenant lined up.
I have known these people for 20 years and I really did not expect this. I don't really know what my options are. I would guess my options are limited.
Can anyone offer some advice on what would be a reasonable course of action?
Sorry for the waffle!
Thanks guys. I have done my best to keep this agreeable for both parties but now they are ignoring the issue. The way I see it is I have kept the building in good order, in fact we have made modifications which has probably increased its value. We have paid 4 and a bit years worth of rent on time. We allowed them access to the building to do things like repairs on their vehicles (we (they) have workshops) use *our* machinery and vehicles FOC, even as far as when they come into the depot my yard hand has washed their cars using our power washer! I really cant have done any more.
I think reading the above their issue is going to be we currently pay well above market rent. In 2010 we agreed the rate and it seemed reasonable, perhaps a few grand over market but not the end of the world. I wanted to keep them happy, we were family bla bla bla.
Having looked around recently I can rent a similar site for c.75% of our current lease. And that's the advertised lease. I think 65% is more like it.
So if they want to re-new the lease the issue is they wont be happy with such a reduction in rent. I presume a court would look at market rates not what you have previously been paying?
I think reading the above their issue is going to be we currently pay well above market rent. In 2010 we agreed the rate and it seemed reasonable, perhaps a few grand over market but not the end of the world. I wanted to keep them happy, we were family bla bla bla.
Having looked around recently I can rent a similar site for c.75% of our current lease. And that's the advertised lease. I think 65% is more like it.
So if they want to re-new the lease the issue is they wont be happy with such a reduction in rent. I presume a court would look at market rates not what you have previously been paying?
No there is nothing of that nature in the "lease". The document I refer too is more of a payment schedule really but just with a few terms in there.
If we did move out then it would be my intention to put it back to how it was. It wont take long with the machinery we have here!!
Luckily I documented the renovation in photos so I can easily show before and after.
If we did move out then it would be my intention to put it back to how it was. It wont take long with the machinery we have here!!
Luckily I documented the renovation in photos so I can easily show before and after.
Oh and as for redevelopment or owner occupation. First one is possible I guess but difficult - its on a large industrial area there is no chance of housing etc so they would have to maybe build new units or something? Second - owner occupation - again possible but they are retired now and would have no purpose for it. It would also cost them c. £20k a year in rates, insurance and general upkeep so I cant see them doing that.
I genuinely think they just think it comes to the end of the agreement and we move out?
I genuinely think they just think it comes to the end of the agreement and we move out?
cuneus said:
Do a lot of your customers come to the site ?
If not consider just moving, my "trouble radar" is going off
We are mainly a delivery business but we do offer cash and carry which is c.25% of the business.If not consider just moving, my "trouble radar" is going off
A lot of this business comes from 2 local companies who we have built a very good relationship with over the last 3 years.
If we did move the business I expect we would lose all that trade overnight.
Thanks for that.
Also, renewing the lease is not actually what we want (that's all good info though) - we want to purchase the property as we ALL agreed 5 years ago.
So in reality we are looking to enforce that verbal contract we had. Just how possible that will be I am not entirely sure!!
Also, renewing the lease is not actually what we want (that's all good info though) - we want to purchase the property as we ALL agreed 5 years ago.
So in reality we are looking to enforce that verbal contract we had. Just how possible that will be I am not entirely sure!!
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