Security of Tenure

[KimT]

I'm seeking advice as I'm feeling extremely uncertain and inexperienced in this situation. Currently, I'm in the process of leasing a commercial unit to establish a restaurant. The space has been unoccupied for nearly two years and requires substantial renovation.

We've estimated the renovation and shop-fitting costs to be between £45k to £50k. The landlord has agreed to a six-month rent-free period, but a six-month deposit is required. The lease being offered is for five years with a mutual break point at year three.

Initially, everything seemed to be going smoothly. However, the solicitor handling our lease informed me that the landlord intends for the contract to fall outside the 1954 Tenant and Landlord Act. Subsequently, after speaking with the agent and the landlord, they told us that they are happy to commit to granting us a new lease while the current one expires as long as this is possible in the circumstances. But he is not willing to write the current lease inside the Security of Tenure act.

I'm feeling incredibly confused. Is it common for commercial leases to fall outside this act?

Do you suggest me that it is okay agree to this term ?

And is it too risky for me to proceed with this arrangement?

Despite my concerns, I believe in the potential of the business.

Any advice on this matter would be greatly appreciated.

Thank you in advance for your assistance.

 

[WaveJumper]

Hats off to you for actually taking legal advice when sorting out your lease. The bottom line as you have probably been advised is outside the act gives the landlord the upper hand here so your future bottom line is less secure not what you want to hear when investing a lot of time and money into your new adventure.

On the landlord side it could well be they have one eye on future plans for development, especially if they own other properties near by. You mentioned that yo had negotiated a six month rent free, which was a smart move, depending on your costs (which you don't mention) you might even been able to get a contribution to fit out costs too.

Bottom line yes is less secure, and not knowing the landlord and area your in, landlord sounds like they are very much keeping their options open. You could press them again especially as unit has been empty for sometime, or a real pain in the backside but is there something else more suitable near by

 

[Mark T Jones]

Agree with @WaveJumper - well done for being wise enough to take advice, and be very cautious with this lease.

Don't sell yourself into the idea that this is the 'ideal' location for you - experience says there is always another just around the corner. No need to rush in, particularly as the landlord wants to stack the deck in their favour..

As an independent, your fitout budget looks pretty low - do a lot of research on the one, as they have a tendency to run away with you.

 

[KimT]

Agree with @WaveJumper - well done for being wise enough to take advice, and be very cautious with this lease.

Don't sell yourself into the idea that this is the 'ideal' location for you - experience says there is always another just around the corner. No need to rush in, particularly as the landlord wants to stack the deck in their favour..

As an independent, your fitout budget looks pretty low - do a lot of research on the one, as they have a tendency to run away with you.

Thank you very much for the replies.
Very valuable advice

The landlord owns the full block of building and this unit is just one of them.

I was right about the cost it will take to refit. ( hoping ) i got multiple contractors to see the unit and work required. And we are buying mainly second hand catering equipment to keep the cost low.

If i ask the landlord to add a clause in the lease saying -

"At the expiration of the term of this lease, Tenant shall have the option to renew this lease for an additional term of [insert number] years, upon written notice to Landlord no later than [insert time frame, e.g., six months] prior to the expiration of the initial term. The terms and conditions of such renewal shall be negotiated in good faith between the parties. It is understood and agreed that any such renewal shall be subject to written agreement by both parties.”


Is this going to make our lease any secure ?

 

[NickGrogan]

Are you really going to take advice from randoms on a forum about the actual wording of the lease? That seems like a really bad idea, especially as you seem to be inexperienced.

Get a good solicitor and pay them well.

In answer to your question, no the above clause wont make it secure.

 

[WaveJumper]

Go back to your solicitor - but there's no way the landlord will agree, they want the flexibility for a reason.

 

[KimT]

Go back to your solicitor - but there's no way the landlord will agree, they want the flexibility for a reason.

I spoke to the landlord directly and gave me the his reasonings. He agreed to the lease to be inside the act.

Thanks guys. Appreciate your replies

 

[Gyumri]

The landlord has agreed to a six-month rent-free period, but a six-month deposit is required. The lease being offered is for five years with a mutual break point at year three.

As somebody who has owned and ran a restaurant for my sins the break clause after 3 years is suicidal.

Do you really want to build up a business for 3 years only to then hand it over to the landlord with all mod cons as a fully fitted restaurant?

it won't matter if the lease is outside the Act if there is no lease to renew.

As others have suggested don't sleep walk into the venture but get proper legal advice.

 

[WaveJumper]

I spoke to the landlord directly and gave me the his reasonings. He agreed to the lease to be inside the act.

Thanks guys. Appreciate your replies

On the face of it a good result, what where his reasons