Vacating/walking away from a commercial lease

Hello. I would appreciate some advice on my situation. I opened up a shop last summer and although things started strongly, it's bombed big-time (apart from Christmas time which was great) and week to week I barely have enough to live on. I am on housing benefit, working tax credit etc to get by, way off being able to afford to employ anybody to have a holiday etc etc (not looking for sympathy here honest!). The lease was taken out in my personal name, on my own with no guarantor. I have no assets or savings.

I signed a 5 year lease with a 2 year break point (@ May 2018). I won't be able to continue up to the break point and frankly I wouldn't want to because it's clear the business is unsustainable. I can struggle on until the 1 year point that's it.

I wrote to the landlord back in November outlining my concerns and we agreed that I could re-assign. I had a few people lined up privately but they all pulled out.

So my questions are:

Am I able to start winding up the business now, sell off my stock, and hand the keys back to the landlord in May? One complication is that I will forfeit the break clause by not paying rent up to the break point, meaning I become liable for the entire 5 years on paper! Bad situation worse, so to speak.

I'm happy to write to him now saying I'm going to hand him the keys on 31 May unless he agrees to surrender the lease. Or should I just walk away?

The rent is £6k per year + VAT in a big city so pretty small fry. Is he likely to come after me if I jump? I plan to travel and work abroad next - NOT because of my 'debts'*, simply a long term plan I've had which I might as well do now this has gone t*ts up. What is he likely to do? Nothing until 2021 and then pursue me for the full 5 year's worth of rent I haven't made use of?!

I should point out that he doesn't have my current address (let alone my next one) and I am leaving the premises in FAR better condition in which I found it - nicely decorated, clean and empty. Again, I'm happy to tell him I'm off but I simply can't stick it until 2018, there's no money.

*I call it 'debts' because I haven't run away from thousands of pounds worth of credit card spending. I've simply signed a piece of paper which I can no longer afford.
 
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obscure

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Jan 18, 2008
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One complication is that I will forfeit the break clause by not paying rent up to the break point, meaning I become liable for the entire 5 years on paper! Bad situation worse, so to speak........

What is he likely to do? Nothing until 2021 and then pursue me for the full 5 year's worth of rent I haven't made use of?!
Why would he wait until 2021? If you breach the contract you become liable for the full amount immediately so he could sue you for it now.
 
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Why would he wait until 2021? If you breach the contract you become liable for the full amount immediately so he could sue you for it now.

Why? Surely he has an obligation to attempt to re-let the place to mitigate damages? Which I'm sure he would do, and consider pursuing me for any costs/losses in the period it was empty.

Are you saying he'd sue me for the full length of the lease shortly after I left? So I would have to pay £20k+ for not having a shop? The lease would have been forfeited. That's impossible.

Seriously though, what are the steps he can take to pursue me? A court order? Like I said he doesn't have my address and I would have no means of paying him.
 
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I guess you're registered as solo trader ?

Why you didn't registered as LTD ? 5 years commitment on a solo trader is a big thing to do...

Yes and that's why I put in the break clause but I wish it had been at the year point and not 2. I'm not impressed with my solicitor to be honest. The landlord was aware I was new to the game and in fact told me he didn't think the shop would be successful.
 
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Yes and that's why I put in the break clause but I wish it had been at the year point and not 2. I'm not impressed with my solicitor to be honest. The landlord was aware I was new to the game and in fact told me he didn't think the shop would be successful.

Well then I think that you should try to get another legal advice... As solo trader you need to be very careful what you will do next...
 
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But if I can't pay? And he doesn't have to accept the break if he wants to be cruel and finds something wrong with the condition of the property or something.

I'm writing to him to suggest we surrender the lease and I pay what I can afford compensation-wise or I walk away.
 
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ethical PR

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  • Apr 20, 2009
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    Yes and that's why I put in the break clause but I wish it had been at the year point and not 2. I'm not impressed with my solicitor to be honest. The landlord was aware I was new to the game and in fact told me he didn't think the shop would be successful.

    So the landlord, was honest and told you he didn't think the shop would be successful and you still went ahead and locked yourself into a mid term lease?

    It seems you are looking for others to blame - landlord, solicitor rather than looking at the decisions you made.

    And it is you rather than the landlord who should be mitigating against damages by trying to relet the lease - you are the one who is responsible for it at least for the next two years.

    Either speak to your solicitor about your options and/ or one of the debt management charities. You could look at bankruptcy as an option but do make yourself aware of the implications for you business and personally if you go down this route.
     
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    I'm not looking for anyone else to blame, I took the risk knowing full well what I was walking into - we wouldn't have got very far in this world without risk takers - and now I'm trying to find the cleanest way out of it.

    Saying I need to re-let the property is very easy but this costs money and I have none, to pay for my own outgoings let alone the business and let alone paying out more to close the business. I already have a loan which I used to start the business and cannot get any more credit.

    I don't see the need to involve debt management charities because I don't currently have any debt which I am not paying off. I am solvent and have a glowing credit rating. I simply want to get out of this lease because otherwise the situation is going to get worse, which I think is a responsible thing to do.

    The landlord, for religious reasons, has no interest or knowledge in my sector of retail and retail in general because he is not a full-time property person. So I rated my expert knowledge on the subject a little higher. Don't get me wrong, the shop is making a profit but simply not enough and it's getting worse because Br*xit has increased costs.
     
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    kulture

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  • Aug 11, 2007
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    Landlords have been known to accept surrender of leases for a fee. In the past I have managed to settle for a 3 month rent after I vacated. I have heard that some may accept 6 months. They do this because they end up with the money, have no hassle to chase you, and even if they did chase you they could end up with lots of costs and no money as you would go bankrupt.

    If possible I would sell everything ad see if you can raise that kind of money. It would be a shame to go bankrupt over so "small" an amount.

    If they do agree, GET IT IN WRITING.
     
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    Landlords have been known to accept surrender of leases for a fee. In the past I have managed to settle for a 3 month rent after I vacated. I have heard that some may accept 6 months. They do this because they end up with the money, have no hassle to chase you, and even if they did chase you they could end up with lots of costs and no money as you would go bankrupt.

    If possible I would sell everything ad see if you can raise that kind of money. It would be a shame to go bankrupt over so "small" an amount.

    If they do agree, GET IT IN WRITING.

    Thanks for the very helpful reply. It seems a small amount, but £6k +vat over the remaining 4 years plus other costs he could go after me for if I up and leave, plus costs for cancelling the phoneline, credit card machine etc... all add up. Not to mention my personal loan and credit card. Going BR would draw a line under the whole lot. And of course my plans to go abroad would be unaffected by UK bankruptcy.

    I just can't see him agreeing to surrender the lease, and it would cost me an arm and a leg in rent and legal fees as well as 3/6 months rent he might ask for. He's not even answering his phone at the moment so seems to have no interest in helping me!

    I could send him a letter saying let's talk about surrendering the lease otherwise I'm going BR, but I don't want to sound threatening.
     
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