Legal Eagles - Commerical Lease Advise

[IATM]

Hi All,

Looking for some advise on a commerical Lease.
Currently the wife and I both run limited companies and both are looking for a commerical unit. Struggled to find 2 seperate commerical units at a reasonable rate and on the off chance managed to find a larger unit that suits both our needs perfectly. Now setting aside the discussions I am having with the regional rates team to split the property in two for the two companies we wanted to get some advise on the commerical lease side.

The landlord is really nice and is working with me to give me a favourable lease deal and any help I need (I find out today its been vacant for 4 years so I know why). He is not willing to give out two leases on the basis that if one company folds he still needs to honour the lease for the other company - I understand this completely so I mentioned about if my company was to sub lease to the wifes company and he said that was a possibility however also said in passing it would be set up as such if one company folded the other would be liable for the full lease.
Surely if my company folded who was subletting then both leases would be dissolved.

I hopefully will never be in the position this will happen but just want to cover my rear end if it does - also is there anything else I should think about?

Thanks in advance.

[Small Car]

You could take the lease in a new co and sublet to the two companies, which could each own half the top co each?

This might help at the end of the lease with any residual liabilities?

[jesfirth]

From the landlords perspective it's all about security of income stream which creates his investment value. Unless he is naive he will not allow the failure to either company to let you off the hook. Unless it is a very small unit or your businesses have excellent covenant strength he is likely to ask for some form of rent deposit or guarantee.

Be very careful of the repairing, alterations, yielding up, alienation and service charge lease terms and the 54 act if you need security of tenure. Many inexperienced lessees get caught. Unless you understand the detail of all the above I suggest you obtain professional advice. It will save you money in the long term.

[PurpleMoonlight]

IATM said:

The landlord is really nice and is working with me to give me a favourable lease deal and any help I need (I find out today its been vacant for 4 years so I know why). He is not willing to give out two leases on the basis that if one company folds he still needs to honour the lease for the other company - I understand this completely so I mentioned about if my company was to sub lease to the wifes company and he said that was a possibility however also said in passing it would be set up as such if one company folded the other would be liable for the full lease.
Surely if my company folded who was subletting then both leases would be dissolved.

No.

Your wifes company would still have a right of occupation for at least the remaining term of her lease (longer if she as security of tenure under the Landlord and Tenants Act 1954) and the owner would become her landlord rather than your company.

[Chrisgr31]

I wouldnt rush t split the rating assessment for the two businesses. The sum of the two parts may be greater than the whole, although there may be an advantage if both qualify for small business relief, which is based on the rateable value of the property, not the size of the business.

[IATM]

Chrisgr31 said:

I wouldnt rush t split the rating assessment for the two businesses. The sum of the two parts may be greater than the whole, although there may be an advantage if both qualify for small business relief, which is based on the rateable value of the property, not the size of the business.

This is exactly what I am waiting to find out. As a whole the rateable value is 14.5k which I hope after a split will come to well below or as long as it's below 10k for 100% relief.

[surveyor]

Not sure what all the fuss is about. My suggested structure (assuming yours and wife's comapny are A & B - could be swapped around).

Lease to Company A
Guarantor by Company B - LL has his security.

Include within Lease a clause allowing subletting of Part to Company B. Or even some bdisation of a group sharing clause permitting Company B to occupy under license.

Easy peasy.

PS

Expert advice seconded and thirded here. And the owner is not working with you to give you a good deal. He's trying to get as good a deal for himself as he can....

[PurpleMoonlight]

My guess is the fuss is that the OP doesn't want his wifes company to be liable for the whole lease if his company fails, and the landlord doesn't want to be possibly left with half a property to let.

[surveyor]

Fair point, but no LL will move on that unless maybe the division is really neat and they rarely are unless designed with that in mind.

[IATM]

PurpleMoonlight said:

My guess is the fuss is that the OP doesn't want his wifes company to be liable for the whole lease if his company fails, and the landlord doesn't want to be possibly left with half a property to let.

This is exactly the problem - at the end of the day if one company fails the other company essentially cannot afford to or needs a property of such a size.

Of course as you mentioned the landlord also said to me if one company folds then they don't want to have to honour half a space of the unit.

The Rates team came back to me to say everything should be ok but they would want to see the leases.

Thanks