Lease holder concerns?
Discussion
I have a lease holder in a commercial property that's starting to be a problem.
He has a 10 year lease and is 6 years into it.
When he took the lease he was in a nice secure position, married with kids, large house that he owned and 2 businesses.
But he has now split with the misses, nasty divorce and all that brings, one of his companies has gone to the wall.
Now the rent has to be chased, and maintenance on the property has not been done.
I also think he is in a position to leave the country and all his woes behind.
Not sure if there is anything I can do to prepare for what looks like the inevitable?
He has a 10 year lease and is 6 years into it.
When he took the lease he was in a nice secure position, married with kids, large house that he owned and 2 businesses.
But he has now split with the misses, nasty divorce and all that brings, one of his companies has gone to the wall.
Now the rent has to be chased, and maintenance on the property has not been done.
I also think he is in a position to leave the country and all his woes behind.
Not sure if there is anything I can do to prepare for what looks like the inevitable?
Yep, I'd agree. Assuming it's a Ltd Co actually leasing with no personal guarantee the best course of action would be a 'friendly chat' and try to part amicably. He may be reluctant to approach you to do so for obvious reasons but it's probably the best out for you.
Just because you can go to court and pursue doesn't mean it's the best course of action because in my experience it rarely is.
Just because you can go to court and pursue doesn't mean it's the best course of action because in my experience it rarely is.
research forfeiture. also empty rates don't last for long, so voids will be expensive.
Consider if you are charging too high a rent. Might be better to take a drop, if it makes his business more sustainable, and avoids the expensive void, particularly if you will also have to accept a lower rent next time anyway.
Hold on for the ride. Don't let the arrears build up.
Consider if you are charging too high a rent. Might be better to take a drop, if it makes his business more sustainable, and avoids the expensive void, particularly if you will also have to accept a lower rent next time anyway.
Hold on for the ride. Don't let the arrears build up.
tight fart said:
I have a lease holder in a commercial property that's starting to be a problem.
He has a 10 year lease and is 6 years into it.
When he took the lease he was in a nice secure position, married with kids, large house that he owned and 2 businesses.
But he has now split with the misses, nasty divorce and all that brings, one of his companies has gone to the wall.
Now the rent has to be chased, and maintenance on the property has not been done.
I also think he is in a position to leave the country and all his woes behind.
Not sure if there is anything I can do to prepare for what looks like the inevitable?
Precursor letter prior to actual repossession under s.146 would be my best advice given the limited information available. The initial letter will have about a 50/50 chance of recovering arrears with no further action required and I would be very surprised if solicitor's costs aren't payable by your lessee under the terms of their lease so it ought not cost you much if anything ultimately. He has a 10 year lease and is 6 years into it.
When he took the lease he was in a nice secure position, married with kids, large house that he owned and 2 businesses.
But he has now split with the misses, nasty divorce and all that brings, one of his companies has gone to the wall.
Now the rent has to be chased, and maintenance on the property has not been done.
I also think he is in a position to leave the country and all his woes behind.
Not sure if there is anything I can do to prepare for what looks like the inevitable?
Get in touch with a good Landlord and Tenant solicitor in your area or feel free to pm.
ImonsterXI said:
tight fart said:
I have a lease holder in a commercial property that's starting to be a problem.
He has a 10 year lease and is 6 years into it.
When he took the lease he was in a nice secure position, married with kids, large house that he owned and 2 businesses.
But he has now split with the misses, nasty divorce and all that brings, one of his companies has gone to the wall.
Now the rent has to be chased, and maintenance on the property has not been done.
I also think he is in a position to leave the country and all his woes behind.
Not sure if there is anything I can do to prepare for what looks like the inevitable?
Precursor letter prior to actual repossession under s.146 would be my best advice given the limited information available. The initial letter will have about a 50/50 chance of recovering arrears with no further action required and I would be very surprised if solicitor's costs aren't payable by your lessee under the terms of their lease so it ought not cost you much if anything ultimately. He has a 10 year lease and is 6 years into it.
When he took the lease he was in a nice secure position, married with kids, large house that he owned and 2 businesses.
But he has now split with the misses, nasty divorce and all that brings, one of his companies has gone to the wall.
Now the rent has to be chased, and maintenance on the property has not been done.
I also think he is in a position to leave the country and all his woes behind.
Not sure if there is anything I can do to prepare for what looks like the inevitable?
Get in touch with a good Landlord and Tenant solicitor in your area or feel free to pm.
Have a polite word with him to say that you understand his situation and how difficult his situation is etc etc.
Is his poorer rent payment record a symptom of him struggling as a business or just because he has a lot of other stuff on his plate at the moment which takes precedence to him? Ask if it would be of help if he is struggling to pay rent whether there are issues with continuing in the shop and, if so, might it be help to suggest that he puts it on the market to let and if he finds a new tenant he can be released from his obligations.
I would be slightly cautious about you putting it on the market since if it gets messy you could be seen as accepting surrender.
Bear in mind that he has protection through the Landlord and Tenant Act and will benefit from what is known as quiet enjoyment.
Is his poorer rent payment record a symptom of him struggling as a business or just because he has a lot of other stuff on his plate at the moment which takes precedence to him? Ask if it would be of help if he is struggling to pay rent whether there are issues with continuing in the shop and, if so, might it be help to suggest that he puts it on the market to let and if he finds a new tenant he can be released from his obligations.
I would be slightly cautious about you putting it on the market since if it gets messy you could be seen as accepting surrender.
Bear in mind that he has protection through the Landlord and Tenant Act and will benefit from what is known as quiet enjoyment.
surveyor said:
BIt like treating the symptoms and not the illness IMO.
Respectfully disagree based on my experience in this field, though your username suggests that you have plenty of the same too.Option 1: Behind in rent = 146 forfeiture no questions asked = empty property = need to re-let. Fine if you're in an area where you can find another lessee quickly and commercially problematic if you can't.
Option 2: Send precursor letter threatening option 1 = perhaps payment with a c.£300 "tax" to lessee. If they don't pay at that stage, they'll likely not pay anyway so you may as well have forfeited from the get go.
I suspect your next steps are in reality dependent in part on the actual financial stability of your tenant, and how easy it will be to re-let the property should it become vacant.
If the property will be easy to relet and a higher rent than the one passing then upsetting the tenant and having them leave is not a big issue, however will take time and cost some money.
If on the other hand the property will be difficult to relet, or will relet at a lower rent then you would do better speaking to the tenant, offering a deal etc.
If the property will be easy to relet and a higher rent than the one passing then upsetting the tenant and having them leave is not a big issue, however will take time and cost some money.
If on the other hand the property will be difficult to relet, or will relet at a lower rent then you would do better speaking to the tenant, offering a deal etc.
Chrisgr31 said:
I suspect your next steps are in reality dependent in part on the actual financial stability of your tenant, and how easy it will be to re-let the property should it become vacant.
If the property will be easy to relet and a higher rent than the one passing then upsetting the tenant and having them leave is not a big issue, however will take time and cost some money.
If on the other hand the property will be difficult to relet, or will relet at a lower rent then you would do better speaking to the tenant, offering a deal etc.
100% this. No point going nuclear and trying to kick him out if you're going to be stuck with a vacant unit, void costs and agency fees.If the property will be easy to relet and a higher rent than the one passing then upsetting the tenant and having them leave is not a big issue, however will take time and cost some money.
If on the other hand the property will be difficult to relet, or will relet at a lower rent then you would do better speaking to the tenant, offering a deal etc.
tight fart said:
My gut feeling is he can pay but wants out, I'll see how it pans out in the next couple of weeks.
Surveyor has provided the most solid recommendations I think.You can chase the rent arrears etc and that will plug a short term gap.
But the question is - what if you get a vacant unit?
How long (realistically) will it take you to let, at what rent, and with what rent free?
How does this stack up with your current position?
Once those questions are answered you can then build a strategy
soxboy said:
Have a polite word with him to say that you understand his situation and how difficult his situation is etc etc.
Is his poorer rent payment record a symptom of him struggling as a business or just because he has a lot of other stuff on his plate at the moment which takes precedence to him? Ask if it would be of help if he is struggling to pay rent whether there are issues with continuing in the shop and, if so, might it be help to suggest that he puts it on the market to let and if he finds a new tenant he can be released from his obligations.
I would be slightly cautious about you putting it on the market since if it gets messy you could be seen as accepting surrender.
Bear in mind that he has protection through the Landlord and Tenant Act and will benefit from what is known as quiet enjoyment.
This is sound advice. Chat with him in an open and honest fashion now. What your options are will very much depend on your location, the type of property and what local business needs are. He will also have a dilapidations liability on the decorations and yield up clauses and if he walks away then you'll find yourself with a lot of work to do to make it marketable again. If you can come to a deal then do so, unless it is clear that the market in your area is strong and the unit will let easily.Is his poorer rent payment record a symptom of him struggling as a business or just because he has a lot of other stuff on his plate at the moment which takes precedence to him? Ask if it would be of help if he is struggling to pay rent whether there are issues with continuing in the shop and, if so, might it be help to suggest that he puts it on the market to let and if he finds a new tenant he can be released from his obligations.
I would be slightly cautious about you putting it on the market since if it gets messy you could be seen as accepting surrender.
Bear in mind that he has protection through the Landlord and Tenant Act and will benefit from what is known as quiet enjoyment.
I don't think this point has been raised....is he meant to be paying rent quarterly in advance or monthly in advance under his existing lease? - if its quarterly, you might decide to offer him an informal arrangement whereby he pays his rent monthly in advance for say 3 months to help him get his arrears upto date and at the same time as offering this, that you mention I directly his repairing obligations under the lease....It might be that his cash flow is making it difficult to save 3months rent up and this will help him temporarily although the offer should be conditional on him meeting the monthly agreed payments in full otherwise the informal agreement will be rescinded.
If he admits that he wants "out" you'd be best to agree to this idea once you've done your research on the current marketability and preferably found a new tenant to step straight in, on the condition he clears his arrears, empties the property and makes a half decent job on any repairs (speak with a local commercial agent to get a marketing report which they'll often provide FOC to win your custom and organise a landlord's inspection to take the agent around without telling the tenant the full story).
You're right to acknowledge you don't want his business going into administration as it can be a prolonged and stressful experience as a landlord, especially if the tenant provides a large part of your income as administrators won't be quick to clear things up unless they have a readily sellable business.
If he admits that he wants "out" you'd be best to agree to this idea once you've done your research on the current marketability and preferably found a new tenant to step straight in, on the condition he clears his arrears, empties the property and makes a half decent job on any repairs (speak with a local commercial agent to get a marketing report which they'll often provide FOC to win your custom and organise a landlord's inspection to take the agent around without telling the tenant the full story).
You're right to acknowledge you don't want his business going into administration as it can be a prolonged and stressful experience as a landlord, especially if the tenant provides a large part of your income as administrators won't be quick to clear things up unless they have a readily sellable business.
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