My business partner wants me on the lease

[rperez]

Morning all,

I brought into a hair salon business around 8 years ago., I had been working there for 8 years before But my name was never put on the lease.
We are 60/40 (me)
Business is limited.

I am at a stage in my life where I am thinking do I really want to own more business and completely take it over from her, when she wants to retire, she says she got another 10 years.

I am thinking maybe I don’t , I have a young one age 3, family now and maybe don’t want to work all the hours.

She is saying she is speaking to landlord about a new lease with me and her on it for another 10years.
But I am so worried about signing the dotted line, am I making a bit mistake?

What if I don’t sign ?

 

[fisicx]

If you don’t sign everything will continue as it is. Your business partner might get upset but it’s not going to change the current arrangement.

There is a lot more to it than just signing a lease. You need to be fully aware of your financial responsibilities and any other clauses in the lease. Which means getting professional help so you know what you are signing.

 

[Ozzy]

I think you need to be honest with yourself what you want. As a 40% shareholder you’re already what is known in company law as a PSC (Person of Significant Control). That already comes with responsibilities and liabilities.

So if you’re having doubts and not fully committed to the business then as much as your business partner may be upset it’s kinder to have these conversations to walk away sooner than later. It sounds like your business partner has high hopes and aspirations for you, give them a chance to find someone else if you don’t want it.

 

[WaveJumper]

I can see how your partner may feel your name should go on the lease in essence to share any risk in the longer term for the business. This perhaps is now going to be the turning point for your future and you need to carefully consider what you want. Having your name on the lease comes with all sorts of responsibility and if you do decide this is the way forward you need to seek proper legal advice so you fully understand what you are committing to.

 

[kulture]

If it is a limited company, and have been paying regularly for the last 10 years then you are good tenants. I would be seeking to get the ltd company name on the lease ALONE. With neither of the individuals named on the lease.

 

[Mark T Jones]

I'd suggest the issue here is 'social' rather than legal.

You really need to sit down and have a significant discussion about your business, plans, roles, objectives etc - and if you don't already, GET A SHAREHOLDERS AGREEMENT!

 

[kulture]

I'd suggest the issue here is 'social' rather than legal.

You really need to sit down and have a significant discussion about your business, plans, roles, objectives etc - and if you don't already, GET A SHAREHOLDERS AGREEMENT!

I completely agree, but don’t get individual names on leases just for ‘social’ reasons. The only winner there is the landlord. Show commitment as Mark suggests with talking about the future and planning the future. I also strongly recommend the shareholders agreement.

 

[Paul Kelly ICHYB]

Avoid your name on the lease, even if it means creating a limited company to take it.

 

[The Resolver]

All good advice above especially on the relationship aspects. I especially like kultures point about focusing first on seeking to persuade the landlord to waive the personal guarantees. Thats a double throw if you achieve it and release your co-shareholder also from the burden. and so increase her belief in her need to have you continue in the company.

If you don't achieve it, then an additional benefit of the Shareholders Agreement is the ability to include a clause specific
All good advice above especially on the relationship aspects. I especially like kultures point about focusing first on seeking to persuade the landlord to waive the personal guarantees. Thats a double hit if you achieve it, releasing your co-shareholder also from the burden. and so increase her belief in the need to have you continue in the company. Maybe on the back of that you could negotiate a larger shareholding.

If you don't achieve it, then an additional benefit of the Shareholders Agreement is the ability to include a clause specific to the Lease. For example if she is sole guarantor you may agree to a limited indemnity of half of what she is ever ordered to pay . This will be safer for you than a direct liablity to the landlord since , by the time the business goes under and the guarantee comes into play you might have a counterclaim for any breaches of her duties as director or directly of the SA itself.

 

[Michael Loveridge]

Why is your (or your fellow shareholder's) name on the lease at all? If the property is occupied by a limited company then the lease should be in the company's name.

If it's the case that you and your fellow shareholder are on the lease as personal guarantors then that may have been acceptable 8 years ago, when it was a new business, but assuming the company has been and still is trading profitably, and has always paid the rent on time, there can be no reasonable excuse for the landlord insisting on pg's in the new lease.

As a business tenant the company is legally entitled to a new lease anyway, and if you can't agree terms you can ask the court to decide them. It's unlikely that a court would impose pg's in this situation, so as a starting point you should simply refuse to supply guarantees at all.

 

[Gyumri]

As a business tenant the company is legally entitled to a new lease anyway,

Not if the contract opts out of the Landlord And Tenant Act 1964- which is often the case to avoid giving the tenant an automatic right to renew.

 

[Michael Loveridge]

Not if the contract opts out of the Landlord And Tenant Act 1964- which is often the case to avoid giving the tenant an automatic right to renew.

The default position is that a tenant IS entitled to a new lease, and only a small minority of leases are contracted out.

As the OP didn't say they were contracted out it's reasonable to assume they aren't, though no doubt they will confirm if I'm wrong.

 

[Gyumri]

The default position is that a tenant IS entitled to a new lease,

We are singing from the same hymn book!

 

[kulture]

We are singing from the same hymn book!

I am confused by about turn regarding the landlord and tenants act. On one post you imply that most commercial leases are opted out and on the above you agree that most are opted in. I don’t know myself which is the case. All the leases I have agreed in the past the landlord insisted in opting out. As it was a sellers market I agreed. If it was a buyer market I would have insisted on staying within the act. I wonder if there is any statistics on this matter.

Anyway back to the topic. The landlord and tenant act gives the tenant the right to ask for a new lease under SIMILAR terms. I don’t know if there is case law on this definition of similar but if I was a landlord then I would say that a guarantor was a significant term of the original lease and gives me significant protection and thus I would expect to keep it. I don’t know if a judge would agree or not, but I do know that taking this to court would be prohibitively expensive and thus unlikely.

So in the real world, negotiate with the landlord, ask for any personal guarantee to be removed and see what they say. Don’t threaten court action as this would likely inflame negotiations and be counter productive.

As in all cases of negotiations, you have a stronger hand if you demonstrate the intention of walking away if you don’t get what you want. If there is a lack of suitable alternative properties, or if it would simply be too expensive to walk, then your position is weaker.

 

[MOIC]

Landlord And Tenant Act 1964

1954

If the landlord wants to keep the PG, offer a larger deposit to remove it as part of a 'reasonable' negotiation. I would also look locally at current rent values to ensure you negotiate a good rent. By splitting with your partner, you maybe able to squeeze a small rent free period, depending on the length of the new lease.

A landlord will want to keep an existing good paying tenant for several reasons, especially that the property will be empty for a period of time, no matter how good the position is. Typically it will take 3 months to agree and sign a lease with a new tenant, so take this into account.

You should also try to exclude any dilapidation clauses and you should consider this if vacating the property, if one exists on the current lease.

A good solicitor should offer the best advice, as the contents of the existing lease must be read to know how to proceed.

Snippets of information will just confuse you.

 

[Gyumri]

I am confused by about turn regarding the landlord and tenants act. On one post you imply that most commercial leases are opted out and on the above you agree that most are opted in.

My response to the suggestion that a tenant is entitled to renew their lease as a matter of law was to say not if that right under the Landlord and Tenant Act 1964 has been excluded under the lease.

 

[Gyumri]

It is the 1954 Act and not "1964":

Overstaying Your Welcome: Excluded Tenancies under the Landlord and T

www.ashfords.co.uk

 

[rperez]

We are now trying to get the landlord to change the lease in to the companies name.

But she mentioned the other day that if we don’t sign it then i am walking away with nothing.

My business partner says she still has another 5 years but then she just wants to work and have no responsibility.
If I am being honest with myself, I would want to work for myself, and set myself up self employed. No lease, no employees, no rent.
But how can I step away from the business and at least get some money back I invested in?
I don’t want to walk away with nothing, and I am getting myself very down and she keeps putting all the work pressure on me. ?

 

[MOIC]

It’s time for both of you to get legal advice on how to move forward keeping both parties happy.

There’s no other way.

 

[The Resolver]

Read my page about shareholder mediation