Naivety with lease - definetly not repenting at leisure!

[dizzybigbird]

Hi! I naively agreed to a 15 year lease on a commercial property and several years into that lease now need to break it - due to personal reasons and lack of finance. Can anyone give me any ideas on how to break the lease without ending up in the courts or as a bankrupt?
Thanks!:rolleyes:

[Faith28]

Can't you sell the lease?

[obscure]

Leave everything to your sister in your will.*

Sure, you will have to wear a dress and wig for the rest of your life but you will be free of the lease. Just make sure you always use the correct public toilet though.


*Also works when trying to extricate yourself from Mafia entanglements.

[deniser]

You have no legal right to break it unless there is a break clause in your lease. Have you read it to check?

Assuming not then you have three options:
1. Advertise the property to let with a commercial agent or privately and then "assign" the lease to the buyer either at a premium if rents have risen considerably since you signed the lease or if you have spent a lot of money on improvements or no premium or even a reverse premium where you pay someone to take the lease off your hands. You will probably be required to guarantee the next tenant's obligations.
2. Approach the landlord carefully asking whether he would be willing to consider a "surrender" ie. hand the lease back to the landlord. Depending on circumstances, he may or may not agree, and if he agrees it will usually be at a price (usually a couple of years rent). It will depend on how quickly and at what rent he can relet or whether he has plans for the property such as redevelopment and you happen to ask him at just the right time. He may well refuse altogether in which case you are left with options 1 and 3.
3. Consider subletting the property in whole or part - again you need to check what is permitted under the lease. You will remain liable for your rent but will have some control over your subtenants. You may even be able to make a profit.

Hope this helps.

[i234i]

i know of someone who had this problem. so Deniser's options are the best as..
he had tried number 2 which the landlord refused.
then said to an agent/listed the lease assignment on gumtree (for someone to take free) which fell through and he then subletted the property and is making some money from it

Turn the bad to good :)

[yorkshirejames]

Are you sure theres no break clause/review clause? I would have expected a 15 year lease would have something in year 8, or even in years 5 and 10.

[deniser]

Yorkshire James you are mixing up break clauses - a clause entitling you to break the lease early which will only be in the lease if you negotiated sufficiently hard at the outset to get it in there - and rent review clauses which mean that your rent is reassessed (and usually goes up) every 5 years (in a 10, 15, 20 or 25 year lease) and sometimes every 3 (in a shorter lease of say 6 years).

These clauses are often linked so that it you don't like the level of rent at review you can then exercise your break option but again only if you put this in the lease at the outset. It is not a standard term.

[dizzybigbird]

Hi

Thanks for your help.
Landlord willing to let surrender for a couple of years rent - question is how to raise the £50,000 he wants when the whole reason for getting out is its not performing well enough in the first place!
Oh well - looks like the bankruptcy option is the only one left!

[deniser]

Have you tried to find a buyer or sublet?

[Jenni@FarrantFrost]

Have you tried to find a buyer or sublet?

From what you've said, this really does sound like the best option.
It's probably worth spending some time trying to pass the lease on, as if you're successful, you shouldn't have to look at the bankruptcy option.

There is most likely to be someone out there who wants to take it over - spend a while trying to find them.

Good luck.

[consultant]

If the assingnment or subletting doesnt work, ask the landlord to be a little more understanding - offer them a small surrender fee on the basis that if they refuse the business will close and they will get nothing.

They may take the view that something is better than nothing!

[stressed-out]

Hi dizzybigbird,

I'm also in a similar position. I'm five years into a 10 year lease. Due to an accident in January I have been unable to work. I informed my landlord at the time and asked if I could be released from my lease, he said he would do this no problem as my health was more important, he requested i give him 3-6 months notice, which I did and I said i would try and find someone to take over the shop in this time.

After several discussions the landlord agreed that he was happy for me to sub-let or alternatively give a new tenant a new lease which would completely release me from the shop.Having now found someone who is willing to sub-let my landlord is now refusing to give me permission to do this, as the new tenant wants to sub-let on a rolling basis, reviewing annually.

After six months I have now completley run out of money and the will to live, by trying to keep the business going I have accummulated debts which I can't pay. I need to shut the shop down now as all the running costs are just getting too much. i think I'll just have to let him sue me. Even though I don't have a bean to give him.

Is there anything at all that I can do?

[Joanne_UK]

Have you looked in going into a IVA (Individual voluntary arrangement)? you may be able to do this if you work.

With an IVA you repay only part of your debts (for 5 years) and you can keep your house if you have one. You have to get rid of all credit cards and cannot apply for any loans for 5 years.

It is better than having to go through a bankruptcy but I think you should get advice now before he sue you !! It is better to be pro active then waiting for things to just happen.

This website gives free (impartial, they are not for profit organisation) you can phone them and they will help you:

www.debtadvicetrust.org (http://www.debtadvicetrust.org)

There is a forum too and general advice on different options.

Hope this helps

[stressed-out]

Hi Joanne,

thanks.

Yes, because I was paying to keep the shop going on my credit cards, I've ran-up personal debts. I've been to the citizens advice bureau and set-up a repayment plan to pay off the debts over a period of time as I am now on incapacity benefit, and receiving a very limited source of income.

All utility bills and rent for the shop have been paid upto the 30th June, but beyond this point I just can't carry on.

I've asked my landlord again if he would release me from the lease and he said he would in exchange for 1years rental income. If I could afford that I wouldn't be closing the business down in the first place.

I'm worried that he will pursue me for this release payment and possibly put my house at risk, does anyone know if he can do this.

Any help much appreciated.

[deniser]

Hi dizzybigbird,

After several discussions the landlord agreed that he was happy for me to sub-let or alternatively give a new tenant a new lease which would completely release me from the shop.Having now found someone who is willing to sub-let my landlord is now refusing to give me permission to do this, as the new tenant wants to sub-let on a rolling basis, reviewing annually.




You are lucky that you have such an understanding landlord. Many would not agree to this. It is not unreasonable for him to refuse consent to a 1 year lease. Can you not either persuade the prospective tenant to take a proper lease? 1 year leases of shops are not the norm.

Or step up your efforts to find another tenant? Maybe one will come along soon?

Have you given personal guarantees for the lease or made a rent deposit? Can you give up your deposit in lieu of a surrender premium?

[deniser]

Hi Stressed-out
Sorry I was writing my post before I saw your last post.
Have you given a personal guarantee? We need to establish that before we can advise you properly?

[stressed-out]

Hi Deniser,

thanks for your response. In reply to your question no I haven't given any personal guarantees (not too sure what this entails) nor had I given any rent deposit.

Any help appreciated.

[deniser]

Is the lease in your personal name or in a company name?

[deniser]

For anyone reaading this who is about to sign a lease, to avoid the same pitfalls, you might want to read this:

http://www.squidoo.com/commercialleases

Sorry I keep posting this but I think it is important.

[stressed-out]

Sorry i should have said, the lease is in my personal name.

I think I'm just going to have to negotiate with my landlord on this and hope I can appeal to his good side.

You just don't think at the time, that ill health could have such a devastating effect on your business.

another lesson learnt the hard way I think.

[Networkology]

This is no way legal advice.

I had a similar situaion many many years ago. After weeks of arguments I gave the landlord the keys back along with 2 months rent and said "I have nothing of value, so sue me". Probably a very risky strategy, but he never did sue me, just took his two months money and found someone else. Guess he didn't want the hassle when the possible outcome was he'd get nothing back anyway.

[stressed-out]

Hi telby & everyone else,

many thanks for all your advice.

There's been some development in the past two days.

1. the prospective tenant that I have is desperate to move in and is now willing to take on the lease (since landlord won't let me sub-let), but for a period of two years with it then being reviewed annually.

2. My landlord is now willing to accept this but only if the new tenant takes the lease for a minimum of 3 years.

I've been doing my level best to try and come up with a solution, but there just seems to be a barrier put up at every turn.

Anyway I had to tell the landlord that as of 30th June, I just couldn't possibly keep the shop going either physically or financially, I'm aFraid I'm in agreement with telby's actions, as I can't possibly continue as things are.

It just doesn't seem fair, that you do your best to keep things going, find a new tenant, and yet if the landlord isn't in agreement, you can get sued regardless. You would honestly think 2 years income would be more acceptable than nothing, and having to go through the courts.

Anyway, fingers crossed for a solution being reached.

And thanks again everyone, it's all been much appreciate and valued.