New commercial shop lease
Discussion
Our shop has been leased from the same landlord since 1974 and not one rent payment has been missed, in fact it is always in advance.
My business partner and I took over in 2000 and just signed a 10 year lease which has rolled over till now, with a rent increase from 2010
.
My partner now wants to retire and come off the lease which the landlord has offered me a new 10 year lease with a 5 year break clause, but they are also asking for 6 months rent as a personal deposit, to be held by the agent something that was not required 20 years ago,
Ideally I would prefer a 7 year lease with a 3 year break clause and it is a limited company
Do you think it’s worth me asking for the 7 years lease and see if they would waive the deposit ?
Thanks for reading
My business partner and I took over in 2000 and just signed a 10 year lease which has rolled over till now, with a rent increase from 2010
.
My partner now wants to retire and come off the lease which the landlord has offered me a new 10 year lease with a 5 year break clause, but they are also asking for 6 months rent as a personal deposit, to be held by the agent something that was not required 20 years ago,
Ideally I would prefer a 7 year lease with a 3 year break clause and it is a limited company
Do you think it’s worth me asking for the 7 years lease and see if they would waive the deposit ?
Thanks for reading
steve2 said:
Our shop has been leased from the same landlord since 1974 and not one rent payment has been missed, in fact it is always in advance.
My business partner and I took over in 2000 and just signed a 10 year lease which has rolled over till now, with a rent increase from 2010
.
My partner now wants to retire and come off the lease which the landlord has offered me a new 10 year lease with a 5 year break clause, but they are also asking for 6 months rent as a personal deposit, to be held by the agent something that was not required 20 years ago,
Ideally I would prefer a 7 year lease with a 3 year break clause and it is a limited company
Do you think it’s worth me asking for the 7 years lease and see if they would waive the deposit ?
Thanks for reading
Simple answer is yes. Lease terms are all arbitrary, usually because of historical contacts or industry norms. There’s nothing stopping you request a custom term length / break clause. My business partner and I took over in 2000 and just signed a 10 year lease which has rolled over till now, with a rent increase from 2010
.
My partner now wants to retire and come off the lease which the landlord has offered me a new 10 year lease with a 5 year break clause, but they are also asking for 6 months rent as a personal deposit, to be held by the agent something that was not required 20 years ago,
Ideally I would prefer a 7 year lease with a 3 year break clause and it is a limited company
Do you think it’s worth me asking for the 7 years lease and see if they would waive the deposit ?
Thanks for reading
The only thing that you may see if the rent may creep uo a bit if you are not committing as long.
Everything is open to negotiation.
It depends where you are in the country of course, but the high street is in a right state at the moment, and there are many empty shop units, and more units emptying as we speak. Now is a very good time to renegotiate if this is what you want to do. Many shop landlords are having to cut rents and offer rent-free periods instead of raising rents.
My personal view is that it is wholly unreasonable for the landlord to ask for either a personal deposit or for you to personally guarantee the lease given how long the business has successfully traded for.
I would play hardball if I were you.
Edited to add: How many more years do you foresee carrying on with your business? Would you be looking to sell it or close it? This information may have some bearing on how you proceed.
It depends where you are in the country of course, but the high street is in a right state at the moment, and there are many empty shop units, and more units emptying as we speak. Now is a very good time to renegotiate if this is what you want to do. Many shop landlords are having to cut rents and offer rent-free periods instead of raising rents.
My personal view is that it is wholly unreasonable for the landlord to ask for either a personal deposit or for you to personally guarantee the lease given how long the business has successfully traded for.
I would play hardball if I were you.
Edited to add: How many more years do you foresee carrying on with your business? Would you be looking to sell it or close it? This information may have some bearing on how you proceed.
Edited by anonymous-user on Friday 4th December 14:28
steve2 said:
Our shop has been leased from the same landlord since 1974 and not one rent payment has been missed, in fact it is always in advance.
My business partner and I took over in 2000 and just signed a 10 year lease which has rolled over till now, with a rent increase from 2010
.
My partner now wants to retire and come off the lease which the landlord has offered me a new 10 year lease with a 5 year break clause, but they are also asking for 6 months rent as a personal deposit, to be held by the agent something that was not required 20 years ago,
Ideally I would prefer a 7 year lease with a 3 year break clause and it is a limited company
Do you think it’s worth me asking for the 7 years lease and see if they would waive the deposit ?
Thanks for reading
Its a buyer's market for commercial property right now. Rents will be static if not falling judging by what's going on on our business estate.My business partner and I took over in 2000 and just signed a 10 year lease which has rolled over till now, with a rent increase from 2010
.
My partner now wants to retire and come off the lease which the landlord has offered me a new 10 year lease with a 5 year break clause, but they are also asking for 6 months rent as a personal deposit, to be held by the agent something that was not required 20 years ago,
Ideally I would prefer a 7 year lease with a 3 year break clause and it is a limited company
Do you think it’s worth me asking for the 7 years lease and see if they would waive the deposit ?
Thanks for reading
As long as you have a half decent set of published accounts that show there is a positive balance sheet then I would point the landlord at those & tell him not to be so silly vis a vis a deposit. Restricting your cashflow by demanding a deposit off you at this point in time is hardly conducive to the best interests of your business (or, therefore, in turn, his business).
Also, suggest read the new lease carefully and compare it to the old one to make sure they don't try & slide in any new clauses/conditions/ obligations re building repairs or service charges etc.
Edited by Wombat3 on Friday 4th December 14:33
We are a small carpet shop in a parade of shops, one side owned by council with a free car park (40 spaces) in the middle, and our landlord owns 9 out of 12 on our side, The buildings were built in 1962 and we do get a lot of leaks through the ceiling from the walkway above, all the shops suffer with this but we try and keep up with the decorating as it would cost tens of thousands to try and put right, cannot find where the rainwater comes from but really the building is knackered.
we have not had to go into our overdraft for quite a few years although there is not tens of thousands left after all bills are paid each month.
They have increased the rent as there is a maisonette above the shop which we are allowed to sublet and have just got a tenant in as it has been empty since January as we had to do a lot of work to it and then had to close the shop due to the lockdown,
I have sent the leases to a solicitor friend to look at and act on my behalf but i do appreciate the comments from you all, it just gives me some ideas to go back to the agent
Thanks
we have not had to go into our overdraft for quite a few years although there is not tens of thousands left after all bills are paid each month.
They have increased the rent as there is a maisonette above the shop which we are allowed to sublet and have just got a tenant in as it has been empty since January as we had to do a lot of work to it and then had to close the shop due to the lockdown,
I have sent the leases to a solicitor friend to look at and act on my behalf but i do appreciate the comments from you all, it just gives me some ideas to go back to the agent
Thanks
If the lease is within the Landlord and Tenant Act as Chris says you are protected. The landlord can ask for these terms but you are not obliged to agree to them, the legislation is there to protect you. Do not feel pressured into agreeing anything.
If possible, do some research to find out what the market rent is and also the terms other tenants are on. Has there been anyone move in recently?
I don't know where the property is or the rent levels involved, but even pre-Covid a 5 year lease was the longest that most retailers were agreeing to. A point of note is that if you take a 10 year lease, even if there's a break, you will be paying Stamp Duty on the full term.
If possible, do some research to find out what the market rent is and also the terms other tenants are on. Has there been anyone move in recently?
I don't know where the property is or the rent levels involved, but even pre-Covid a 5 year lease was the longest that most retailers were agreeing to. A point of note is that if you take a 10 year lease, even if there's a break, you will be paying Stamp Duty on the full term.
Dixy said:
Are any of the shops around empty, decide what you would like in a perfect situation, then make it better and offer that.
Similarly, even if they are not empty but instead occupied by charities (the Landlord's last resort) then it indicates you are in a strong position to negotiate what you want.Wombat3 said:
Dixy said:
Are any of the shops around empty, decide what you would like in a perfect situation, then make it better and offer that.
Similarly, even if they are not empty but instead occupied by charities (the Landlord's last resort) then it indicates you are in a strong position to negotiate what you want.There has never been a better time to renegotiate your lease with a landlord if you are in a shop/retail premises.
For many landlords at the moment the choice is 'empty' or 'charity shop', and keeping the premises occupied even at reduced rent is far preferable to empty.
Look at what the big retailers and high street names have been doing to their landlords over the last couple of years - Telling them they either reduce or cancel the rent, or they can have the premises back, and start paying the business rates on an empty property.
As has been said, everything is open to negotiation.
As a tenant you can afford to take a bold position at the moment.
Firstly, a point raised by another response, is your lease inside the act? If so you do not want to lose that protection by not following the correct process/timing. Take advice on this from your solicitor.
As to the nuts and bolts, have you considered that the rental value of the shop may have reduced? Take some time to look at what other units are on the market and what terms are being quoted. Even if you don't want to move it is worthwhile calling an agent or two to discuss availability, the benefit is twofold, you might be pleasantly surprised about what you hear, it gives you information to have a more knowable conversation with your landlord who may then use a sharper pencil.
Three key things I would suggest:
1. Keep it flexible with tenant break dates or perhaps even a rolling break.
2. If you have not already done so move to monthly rent payments rather than quarterly, this is normally an easy give for a landlord.
3. Consider a pandemic clause, this could suspend rent if you were prevented from trading by local or national lockdown. Such clauses were pretty well unheard of until this year, not surprisingly they are now a common retail tenant ask and indeed a potential red-line.
Finally, do consider appointing an agent. There are a lot of very helpful people on here, some with good advice, some less so. A modest agent fee could be re-paid many times over by a saving pence per foot and other improvements in the lease.
As a tenant you can afford to take a bold position at the moment.
Firstly, a point raised by another response, is your lease inside the act? If so you do not want to lose that protection by not following the correct process/timing. Take advice on this from your solicitor.
As to the nuts and bolts, have you considered that the rental value of the shop may have reduced? Take some time to look at what other units are on the market and what terms are being quoted. Even if you don't want to move it is worthwhile calling an agent or two to discuss availability, the benefit is twofold, you might be pleasantly surprised about what you hear, it gives you information to have a more knowable conversation with your landlord who may then use a sharper pencil.
Three key things I would suggest:
1. Keep it flexible with tenant break dates or perhaps even a rolling break.
2. If you have not already done so move to monthly rent payments rather than quarterly, this is normally an easy give for a landlord.
3. Consider a pandemic clause, this could suspend rent if you were prevented from trading by local or national lockdown. Such clauses were pretty well unheard of until this year, not surprisingly they are now a common retail tenant ask and indeed a potential red-line.
Finally, do consider appointing an agent. There are a lot of very helpful people on here, some with good advice, some less so. A modest agent fee could be re-paid many times over by a saving pence per foot and other improvements in the lease.
Edited by Keep it stiff on Tuesday 8th December 17:33
Just an update, the agent has got back in touch with the landlord and I’m fairly happy with what is on offer,.
There are a couple of little things to sort out but I have instructed a solicitor who deals solely with property and commercial leases and he is also a friend.
I really appreciate the comments you all have made
There are a couple of little things to sort out but I have instructed a solicitor who deals solely with property and commercial leases and he is also a friend.
I really appreciate the comments you all have made
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