getting out of a business lease

[loltolhurst]

Hi,

my chum runs a shop and had to sign up to I think an 8 year lease. The shop isnt doing well and he cannot afford to continue a year later - what are his options bar getting in someone to take the lease over? he is seeking legal advice just wondered myself what he can do?

thanks

[singlecoil]

He should be ok to sub-let it, if he can find someone to sub-let it to. He will still be responsible for the rent, and rates, if his tenant doesn't pay for any reason.

Only other way of getting out of it is to become bankrupt, because even if the landlords decide not to pursue him, the rates people will bankrupt him so that they can go after the landlords for the rates.

[loltolhurst]

although he could his dads a guarantor and he cant go bankrupt apparently. cant imagine theres much demand for shop leases at the mo?

[carsarecool]

We deal in this sort of lease problem a lot.

He needs advice from a Chartered Surveyor dealing in lease surrender all the time, who can look into his lease.

You would not believe the amount of Solicitors who get this sort of thing wrong and it all ends up back at the tennants doorstep.

What's his location?

[Soovy]

loltolhurst said:

although he could his dads a guarantor and he cant go bankrupt apparently. cant imagine theres much demand for shop leases at the mo?

Oh dear.

If he igned for 8 years then unless it says otherwise, then it's 8 years.

He MIGHT be able to sublet, with conditions, but will be on the hook for the rent etc anyway.

[Maxf]

Check out the alienation provisions in the lease - it will tell him if he can sublet or assign.

[loltolhurst]

carsarecool said:

We deal in this sort of lease problem a lot.

He needs advice from a Chartered Surveyor dealing in lease surrender all the time, who can look into his lease.

You would not believe the amount of Solicitors who get this sort of thing wrong and it all ends up back at the tennants doorstep.

What's his location?

thanks everyone - wiltshire

[singlecoil]

If his fgather has guaranteed the lease, and they can't find a tenant, then the father is going to have to go bankrupt as well if he can't afford to pay the rent and rates, unless a way can be found of keeping the shop going. That's the thing with leases, they're a bugger to get out of and that's exactly what the landlord had in mind when his solicitor drew it up.

Even if there is anything in the lease against sub-letting I expect the landlord would still permit it if it meant he was going to get his rent.

Is keeping the shop going, maybe selling something different, not a possibilty?

[SJobson]

carsarecool said:

We deal in this sort of lease problem a lot.

He needs advice from a Chartered Surveyor dealing in lease surrender all the time, who can look into his lease.

You would not believe the amount of Solicitors who get this sort of thing wrong and it all ends up back at the tennants doorstep.

What's his location?

Why would anyone instruct a solicitor unless they'd already agreed a surrender with the landlord? And why would any surveyor specialise solely in lease surrenders?

[carsarecool]

SJobson said:

carsarecool said:

We deal in this sort of lease problem a lot.

He needs advice from a Chartered Surveyor dealing in lease surrender all the time, who can look into his lease.

You would not believe the amount of Solicitors who get this sort of thing wrong and it all ends up back at the tennants doorstep.

What's his location?

Why would anyone instruct a solicitor unless they'd already agreed a surrender with the landlord? And why would any surveyor specialise solely in lease surrenders?

1. How can someone agree something with a Landlord, when they don't know their actual legal position in respect of the lease.
2. Because it pays good money Sir

Seriously, there are many office space agents who employ CS's specialising in this. We work for 3 of them ourselves.

Whereabouts in Wiltshire (it might make a difference in recommending someone if you're interested)?

[loltolhurst]

carsarecool said:

SJobson said:

carsarecool said:

We deal in this sort of lease problem a lot.

He needs advice from a Chartered Surveyor dealing in lease surrender all the time, who can look into his lease.

You would not believe the amount of Solicitors who get this sort of thing wrong and it all ends up back at the tennants doorstep.

What's his location?

Why would anyone instruct a solicitor unless they'd already agreed a surrender with the landlord? And why would any surveyor specialise solely in lease surrenders?

1. How can someone agree something with a Landlord, when they don't know their actual legal position in respect of the lease.
2. Because it pays good money Sir

Seriously, there are many office space agents who employ CS's specialising in this. We work for 3 of them ourselves.

Whereabouts in Wiltshire (it might make a difference in recommending someone if you're interested)?

marlborough

[skwdenyer]

singlecoil said:

Only other way of getting out of it is to become bankrupt, because even if the landlords decide not to pursue him, the rates people will bankrupt him so that they can go after the landlords for the rates.

Err, excuse me, how does this work? The beneficial occupier (or the person entitled to beneficial occupation) is liable for the business rates. If the OP is a tenant, AFAIK his landlord has no rates liability so long as the OP remains in beneficial, actual, exclusive and permanent (for the time being, at least) occupation. Only if the landlord forfeits the lease, or accepts a surrender, will the landlord again start to become liable for the business rates.

Unless you have some different information, of course. But that's the advice I have, as of October 2009.

[singlecoil]

skwdenyer said:

singlecoil said:

Only other way of getting out of it is to become bankrupt, because even if the landlords decide not to pursue him, the rates people will bankrupt him so that they can go after the landlords for the rates.

Err, excuse me, how does this work? The beneficial occupier (or the person entitled to beneficial occupation) is liable for the business rates. If the OP is a tenant, AFAIK his landlord has no rates liability so long as the OP remains in beneficial, actual, exclusive and permanent (for the time being, at least) occupation. Only if the landlord forfeits the lease, or accepts a surrender, will the landlord again start to become liable for the business rates.

Unless you have some different information, of course. But that's the advice I have, as of October 2009.

As long as the lease remains in force then the tenant is liable for the rates, and the landlord is not. Now it may well be that the landlords, being aware that the tenant has no money and no assets, decide not to bother pursuing the tenant for the unpaid rent. The landlords would have nothing to gain (and quite a bit to lose) if they make the tenant bankrupt. So unless they know they can find another tenant they will simply leave the lease in force but unpaid. The local council, on the other hand, will apply to have the tenant made bankrupt so that the lease will be cancelled and then they can chase the landlord for the rates.

Edited by singlecoil on Thursday 11th February 07:58

[carsarecool]

loltolhurst said:

carsarecool said:

SJobson said:

carsarecool said:

We deal in this sort of lease problem a lot.

He needs advice from a Chartered Surveyor dealing in lease surrender all the time, who can look into his lease.

You would not believe the amount of Solicitors who get this sort of thing wrong and it all ends up back at the tennants doorstep.

What's his location?

Why would anyone instruct a solicitor unless they'd already agreed a surrender with the landlord? And why would any surveyor specialise solely in lease surrenders?

1. How can someone agree something with a Landlord, when they don't know their actual legal position in respect of the lease.
2. Because it pays good money Sir

Seriously, there are many office space agents who employ CS's specialising in this. We work for 3 of them ourselves.

Whereabouts in Wiltshire (it might make a difference in recommending someone if you're interested)?

marlborough

Might be a tad far as he's in West London, but I will ask.

[Maxf]

If the company goes into administration then no rates will be payable, as administrators don't pay rates! I'm assuming the guarantor position makes this unlikely though.

[skwdenyer]

Maxf said:

If the company goes into administration then no rates will be payable, as administrators don't pay rates! I'm assuming the guarantor position makes this unlikely though.

AFAIK that's incorrect; if the administrators continue to occupy then they are liable for the rates.

[skwdenyer]

singlecoil said:

skwdenyer said:

singlecoil said:

Only other way of getting out of it is to become bankrupt, because even if the landlords decide not to pursue him, the rates people will bankrupt him so that they can go after the landlords for the rates.

Err, excuse me, how does this work? The beneficial occupier (or the person entitled to beneficial occupation) is liable for the business rates. If the OP is a tenant, AFAIK his landlord has no rates liability so long as the OP remains in beneficial, actual, exclusive and permanent (for the time being, at least) occupation. Only if the landlord forfeits the lease, or accepts a surrender, will the landlord again start to become liable for the business rates.

Unless you have some different information, of course. But that's the advice I have, as of October 2009.

As long as the lease remains in force then the tenant is liable for the rates, and the landlord is not. Now it may well be that the landlords, being aware that the tenant has no money and no assets, decide not to bother pursuing the tenant for the unpaid rent. The landlords would have nothing to gain (and quite a bit to lose) if they make the tenant bankrupt. So unless they know they can find another tenant they will simply leave the lease in force but unpaid. The local council, on the other hand, will apply to have the tenant made bankrupt so that the lease will be cancelled and then they can chase the landlord for the rates.

Edited by singlecoil on Thursday 11th February 07:58

Ah-ha, OK, I understand; that makes perfect sense. Presumably, however, in order to avoid such a circumstance, it is in the tenant's best interests to at least make some token payments so that something is happening towards the rates?

[SJobson]

carsarecool said:

SJobson said:

carsarecool said:

We deal in this sort of lease problem a lot.

He needs advice from a Chartered Surveyor dealing in lease surrender all the time, who can look into his lease.

You would not believe the amount of Solicitors who get this sort of thing wrong and it all ends up back at the tennants doorstep.

What's his location?

Why would anyone instruct a solicitor unless they'd already agreed a surrender with the landlord? And why would any surveyor specialise solely in lease surrenders?

1. How can someone agree something with a Landlord, when they don't know their actual legal position in respect of the lease.
2. Because it pays good money Sir

Seriously, there are many office space agents who employ CS's specialising in this. We work for 3 of them ourselves.

Whereabouts in Wiltshire (it might make a difference in recommending someone if you're interested)?

In respect of point 1, I thought you suggested that the tenant goes to a surveyor rather than a lawyer - as would I, being a lawyer. Bit rude to suggest lawyers get it wrong though; we do our job and you do yours

[Chrisgr31]

If the Rateable Value is less than £15,000 then no empty rates are payable this year, and if the 2010 Rating list RV is less than £18,000 then no empty rates are payable next year either.

The reality is the tenant needs to seek advice from a lawyer an a chartered surveyor. Landlords are unlikely to agree to a surrender of the lease in the current market without payment of a significant sum so the best option is going to be so to to underlet or assign the lease. Most leases prohibit underletting at a rent below passing but there are usually ways around this.

Just get the advice then negotiations can take place with the Landlord about the best option.

[singlecoil]

skwdenyer said:

singlecoil said:

skwdenyer said:

singlecoil said:

Only other way of getting out of it is to become bankrupt, because even if the landlords decide not to pursue him, the rates people will bankrupt him so that they can go after the landlords for the rates.

Err, excuse me, how does this work? The beneficial occupier (or the person entitled to beneficial occupation) is liable for the business rates. If the OP is a tenant, AFAIK his landlord has no rates liability so long as the OP remains in beneficial, actual, exclusive and permanent (for the time being, at least) occupation. Only if the landlord forfeits the lease, or accepts a surrender, will the landlord again start to become liable for the business rates.

Unless you have some different information, of course. But that's the advice I have, as of October 2009.

As long as the lease remains in force then the tenant is liable for the rates, and the landlord is not. Now it may well be that the landlords, being aware that the tenant has no money and no assets, decide not to bother pursuing the tenant for the unpaid rent. The landlords would have nothing to gain (and quite a bit to lose) if they make the tenant bankrupt. So unless they know they can find another tenant they will simply leave the lease in force but unpaid. The local council, on the other hand, will apply to have the tenant made bankrupt so that the lease will be cancelled and then they can chase the landlord for the rates.

Edited by singlecoil on Thursday 11th February 07:58

Ah-ha, OK, I understand; that makes perfect sense. Presumably, however, in order to avoid such a circumstance, it is in the tenant's best interests to at least make some token payments so that something is happening towards the rates?

I can't see it making a difference, if you don't pay all the amount owing , then the council, who are acting as tax collectors for central government, are obliged to do whatever they can to get the rest. Might be worth a try, if it came to it, though.