Please help

[Lifeishard]

Hi

I have been renting 2 units of a converted commercial warehouse for past 18 months.

I have just discovered that businesses situated in 2 adjoining units are paying 45% less rent to the landlord than my company pay. The landlord is aware we have struggled to establish the business and have had to battle each month to continue trading.

I am very annoyed that the other 2 businesses are paying a lot less rent than I am. They have also both had letters to say that the electricity supplier has been changed so from October they will be seeing a reduction in their electric bill, the landlord has not notified me of this reduction!!!

Is there anything I can do legally to get my rent reduced to the same as the other businesses? or am I stuck with what I am paying due to agreeing to it 18 months ago when I took on the lease.

Without the reduction I may have to cease trading as things are so hard at the moment.

Any advise would be appreciated.

 

[LawHound]

The Landord can set the rent as he/she wishes, and many offer lower rents to businesses which present less credit risk, are slightly different, or are on longer leases. However, you need to check your lease with a lawyer, it may well have a process to challenge the rent, and a process for deciding on utility bills.

Even if it does not, there are ways to challenge rent based on market value but any challenges will be at cost to you, and hardly likely to improve the relationship with your landlord.

 

[David Griffiths]

You agreed your rent and have no way to challenge it while the current lease applies. There may be a mechanism to appeal against any rent increases imposed at review dates within the lease, but those are normally "upwards only" reviews. I would be very surprised indeed if there is any provision in the lease to enable you to challenge the current rent.

It may well be that the other businesses agreed their rent some years back and that a review will be done sooner or later. It may well be that they signed for a longer term, or offer a better credit risk.

It might sound harsh, but you agreed to the rent when you signed the lease. What other people pay for their premises is irrelevant.

 

[Lifeishard]

Thank you both for the replies.

I have a ten year lease, the other occupants have five year leases.

I moved in 18 months ago one of the others moved in 6 months ago and the other 2 years.

I guess I was naive in negotiation and am stuck with the terms of the lease, I presume the credit risk is down to me being a new business and the others are well established.

 

I would not P about go to the landlord and ask him why you are paying 45% more for your rent than the other business's.

Most people will wilt under direct assault but not all ,he knows he is turning you over.IMHO.

You could tell him you are going into liquidation owing to the high cost of the rent.E.t.c.

Don't be afraid to bend the truth as he obviously was quite ready to take you for a ride.

Earl

 

[Lifeishard]

Thanks Earl.

I have worked extremely hard to establish the business but it is mentally and physically draining to get cashflow sorted out to cover the rent cost each month. I know if we can get a reduction on the rent then the business will survive and continue to grow and develop (rent is £15,000 per month inc VAT) Without a reduction I cannot continue to trade so will have to liquidate.

It is my first business venture and I have learnt so much from the experience, it would devastate me to have to close but rent is the one big overhead each month. I should of negotiated better terms from the outset but hind sight is a wonderful thing.

I will speak to landlord and put my case forward as you suggest.

Thank you for the reply.

 

[internetspaceships]

£15,000 per month? Good lord would you mind sharing how much space you have for that please?

 

[Lifeishard]

50,000 sq ft

 

[internetspaceships]

That's a reasonable rate per sq ft then, I wanted to establish that before I asked any more questions. It's around what I pay too.

I do have to ask (with no bad motive) how you definately need 50,000 sq ft if you're sailing so close to the wind.

The reason I'm asking is that maybe something could be done WITH the landlords without causing a fight to help the whole situation improve.

Drop me a PM with some contact details.

Jon

 

[Robert Moore]

I know you haven't been running for long but if the rent is far too high and your business might fold as a result then you could think about going into a company voluntary arrangement CVA.

A CVA is where you come to an arrangement with your creditors and agree to pay them a certain amount of pence in the pound. It has to be overseen by an insolvency practitioner. Only do this though if your business is non viable purely as a result of the rent being too high. Just google Company voluntary arrangement. Companyrescue has lots of guides on the process.

Hope this helps

 

[QuickHomeBuyers]

Any PGs on the lease?

 

[laguna]

Do you need/are you using 50,000 square feet?

Does your lease allow sub-letting some of that space?

It just might ease the burden a little.

Actually I just remembered something which might help...
A friend of mine started a PVCu business a few years ago building and installing domestic window frames. He took on a great big bloody mill! - far too big for his purpose and although his lease was cheap and short, he quickly realised his mistake and managed to sub-let the floor above, and he did this covertly!

How?

He took on a partner who made conservatory roofs!
This complimented his own business and as far as the mill owner was concerned it was seen as expansion.

 

[Robert Moore]

Good post. Check the terms of your lease. You can sometimes sublet with the landlords permission which cannot be unreasonably withheld. At the end of the day the LL doesnt want a tenant who cant pay.

You can nearly always assign the lease to someone else as well which again the landlord cannot unreasonably withold.

 

[Alan R Price]

I think it is important to keep a good relationship with the landlord - you may need him on your side. And with respect to Earl, I would not recommend "bending the truth", which could come back to bite you.

I recommend talking to the landlord and telling him how much trouble the high rent is causing you. Yo can say that it is jeopardising the company's financial survival and ask if he can reduce it to help you. Make the point that if you cannot trade profitably you will have to consider closing down the company. Most landlords would rather have a tenanted property with a steady income stream than an empty one producing no money. Yo could also ask him about changing the electricity supplier.

A CVA should be considered a last resort and is only appropriate if the business is actually profitable or can be made profitable, perhaps by reducing overheads by moving to cheaper premises or taking on a sub-tenant. CVAs only work if the company can afford to make contributions towards its debts from future profits.