Asking landlord to release us from lease

emv

Hi

At the moment, we have a short lease on a shop. The landlord plans to demolish theshop & build housing & originally asked for a lease of 3 months with 3 months notice. Our solicitor advised us to ask for a longer term & we now have alease of two years with 6 months' notice of which we've stayed for 12 months, i.e. it's another year before we can give 6 months' notice. We are struggling to pay the rent & our bank account shows that we missed December's rent payment as we just hadn't taken enough money. Our shop is doing OK but all of the money we take is going in rent & council tax with sales about the same now as they were when we first opened. We're also planning to relocate to another area so that we can downsize our house.

We feel that we need to ask the landlord if he'll consider releasing us from the lease after 3 - 6 months' notice & hope that he'll be sympathetic. My idea is to write to him via the managing agents & explain our circumstances & ask whether he would release us from the lease. If not, we would potentially have to wind up the company as we don't have enough money personally to cover the rent. Is there any other way forward that I haven't thought of?

My instinct is to tell the landlord that we are struggling to pay the rent and assure him that we'll continue to pay it for the agreed notice period rather than mentioning relocation. Is there anything else I should be saying to him?

Vix

pitkin2020

dont mention the relocation just be polite and hope he agrees, if he is still planning on building there he may be happy to move forward with the project.

Obviously he could refuse and say that you have to agree to the terms of the contract especially as you actually asked for the terms to be longer.

Do it all in writing so atleast if he agrees then decides to change his mind you have a written confirmation, but i cant see any harm in asking

ciano125

If you have a two year lease with a 6 month notice, then you can give your notice in 6 months time, not at the end of the two years. It may be that I've misunderstood your post, but it may also be that you have a rolling 6 month break clause, ie you can give 6 months notice at any time. Make sure you've read the lease properly and know exactly what it says, you may be surprised.

Failing that, tell him you're going bust and he can have one more months rent or its likely he'll get nothing after that. I've heard of that working before

Pitlanepiglet

I also think you need to make sure you've understood the break clause as what you've said doesn't entirely make sense. It might be better than you think. If you can post the detail here I can advise (commercial property lawyer until the market went tits up a year ago).

Did you give any kind of personal guarantee or is the lease purely in the name of a limited company?

If there is no element of personal exposure I'd work out when you want to go and write to the LL telling him when you intend to leave. The difficulty with that is that he may well then go after you ASAP for the outstanding rent which may cause you some problems.

Ideally when would you want to go?

emv

Thanks, Piglet - will check the wording when we get home later today. My understanding was that we had a 2 year guaranteed term with a break clause at that point. The lease is only in the name of our limited company but we'd prefer not to have any outstanding rent. We'd like to go in about 6 months time so I wonder whether we should suggest that.

Vix

Pitlanepiglet

Hi Vix

Having re-read what you've written I imagine you've got a break at the 2 year point but having given notice 6 months in advance, so you give notice at 18 months that you want to leave at 24 months. So that puts you a bit closer to when you want to go.

The point about it only be Limited Company exposure is that you have much more leverage over your Landlord and he knows it. If the Ltd Co is effectively insolvent he isn't going to get anything which gives you a much stronger position if you are offering to at least make some effort to pay him.

Do not at any point indicate that you would make up any arrears personally. Any debt belongs to the Limited Co, if he wanted you on the hook he needed to get a personal guarantee at the time you took the lease.

Is it a small individual Landlord or one of the bigger retail property owners? What sort of shopping area is it? The LL presumably owns adjoining property?

Let's check when your break clause is effective and then I would suggest you have a "chat" with your LL and you put most of your cards on the table. Don't mention relocating, just tell him that your business is failing and you need to find a way out. Many LL's are very keen to keep properties occupied as it avoids any empty rates liability to them and it continues to pay a share of the service charge for a property (if relevant) also, if he owns adjoining property too many voids makes the place look empty and that has a knock on effect on other traders who also rent from him.

It is very much a tenant market at the moment and you may find that he is prepared to reduce your rent to keep you there.

emv

Hi

I know our solicitor was very surprised as the landlord didn't ask for references or a deposit. Basically we occupy a fairly run-down old shop in the middle of a row of houses. The landlord (which is a property company) owns the house next door & plans to demolish the shop & house and build four houses on the site. He was having some trouble getting planning permission & I think decided to rent out the shop in the short term. Planning permission has now been granted so we wonder if having access to the property may be useful to him.

What do you reckon I do about going through the property agent - just bypass them & write to the landlord? As it's a company, is it worth asking the agent for thename of someone to speak to?

Very grateful for your help!

Vix

Pitlanepiglet

You could have an initial chat with the agent and see if he/she seems helpful and if not then go to the Landlord. Definitely try to get the name of the right person at the LL. I wouldn't write to them, I would talk to them, it's easier to sound them out about options.

They are very likely treating the income from the shop as an added extra so might not be too bothered about you going...

The thing to bear in mind is that if the co is insolvent they will get nothing. There is no point them pursuing the co for the arrears as there won't be any money there. This puts you in a strong position and don't forget that!

I'd have a think about what you really want - would you like to stay longer if the rent was lower or do you want to get out regardless? I'd then go to the LL with a proposition based on what you want to do.

I can't remember what the size limit is for empty rates relief, if it's a small shop the LL won't pay rates on it if it is empty, if it's bigger they will - that will be a big incentive for them to keep a tenant in it. It might be worth a google.

I used to act for large retail owning companies and 12/18 months ago they were doing deals that were effectively rent free so the tenant's paid rent and service charge only so there is probably a deal to be done...

ciano125

Pitlanepiglet wrote: »

I can't remember what the size limit is for empty rates relief, if it's a small shop the LL won't pay rates on it if it is empty, if it's bigger they will - that will be a big incentive for them to keep a tenant in it. It might be worth a google.

If it is outside of London, then it's £15k RV, rising to (I think) £18k. If it is below £2200 RV then there is no empty rates liability at all anyway.

emv

Thanks for that: RV is £8,100 so I guess that means the landlord would get rate relief when empty?

ciano125

Correct. He won't pay empty rates on it when it is empty.