problem with terminating lease - anyone offer any advice ?

waveydave

HI - Im hoping someone may be able to help me out here and let me know if i have a leg to stand on so too speak.

In a nutshell - i tried to terminate my lease on an office i rent by gving 3 months notice as i thought was required only to be told by the landlord that as i had informed him after the begining of december 2011 I was liable to pay a full 12 months rent in one installment before I could terminate. This is all in the lease contract apparently.

What follows is the parts of our lease contract i think are relevant - can post the full contract on line of anyone wants to read it but these are all the parts to do with termnatng teh contract - nothing has been ommited :















And these are my queries :

In -7) Lease Tenure - it states that the lease will, in the first instance, run for 12 months from 1st March 2011 and then, if the landlord agrees to let me, i can have it for a further 6 years - SUBJECT TO NEW RENTALS BEING AGREED.

firstly - when i first took on the office i thought i'd gve it 12 months and see if it took off - its a taxi booking office but my business has grown more towards airport transfers and i do not need an office as everything is internet based. I was under the impression that because the lease ran for 12 months, if after a year it wasnt working i could cancel.

in Tennants right to surrender -9.1) - im happy with giving three months notice and emailed landlord in January to enquire ( had no reply yet)
9.2)- I dont think is relevant as ive been in the office for over 3 months since start of lease
9.3)- I have not taken up the option in clause 7 (i e take on the further 6 years) - there has been NO conversation between the landlord and myself on if wanted to continue wth the lease etc

in Fourth Schedule 11.1 and 11.2 - Notice of the revised rent - I have not recieved a copy of the revised rent and therefore have not agreed or disagreed to it -and it states i should recieve it 28 days prior to the review date but unsure as to when the review date would be ? Surely i should have the right to terminate the lease if the landlord upped the rent wthout me agreeing to it ?


SO - can anyone offer me some guidance here please as im pretty unsure of what to do - Can i get out of the lease ? am i stuck in it for another 12 months ? etc ?

Sorry if ive rambled.

Dave

steve1980

Right, very quickly found the issue.

To surrender your lease you should have given 3 months notice BEFORE the 1st December. Having given notice after that date you now have to pay 12 months "compensation".

The clause is absolutely unbelievable and I can only assume a solicitor hasn't checked this out.

sonastin

Commercial leases are different to residential tenancies. It is assumed that as a business you know what you are getting into and you have acccess to all of the professional advice you need to run your business. Getting a solicitor to advise you on the office lease is considered a necessary cost of running the business and if you choose not to get that advice the business must suffer the consequences.

If you didn't take a solicitors advice when you signed the lease, it might be worth consulting with one now but from a cursory read, you might actually be wasting your money. Without the full document it is difficult to give a definitive opinion and the wording of clause 9.1 does appear to conflict with 9.2 & 9.3 somewhat so there might be some wriggle room but I wouldn't hold out too much hope.

As for the rent review, there appears to be an adequate mechanism in the lease to deal with disputes over the increase in rent so that doesn't give you grounds to break your lease. If you disagree with his valuation, you have to go via an independent valuer and then arbitration to determine a fair increase in the rent which unfortunately you are then stuck with paying.

If you're a small business and this level of complexity is beyond you and/or your bottom line, it might be worth joining something like the federation of small businesses or similar to call on whatever advice they might be able to make available to you.

waveydave

completely understand whats being said, and yep, i should of taken advice before not after - lesson learned there !.

The thing thats bothering me - and with it being a commercial lease i dont know if this would even apply - is that I have to agree to take the lease on for a further 12 months or not ( before the 1st december) BEFORE I even know what the rent will be increased to in the 12 months followng - is that not an unfair term of the lease ?
I still have not even heard form the landlord what the increase for this year is yet.

steve1980

Was the lease made up on the back of a fag packet? It sounds like it has.

Get some legal advise and hope there is a loophole somewhere, otherwise it's a steep learning curve.

waveydave

steve1980 wrote: »

Was the lease made up on the back of a fag packet? It sounds like it has.

Get some legal advise and hope there is a loophole somewhere, otherwise it's a steep learning curve.

lol - if only that was the case - id guess i have been "done over" so too speak - previous tenant was an assocate and on enquiring with him if he knew of any offices to rent he suggested taking over the one he was n as he was moving away from the area - it was squared with the landlord, new lease sent over and bobs your uncle, i had a read - thought i understood the implications, signed, sent it back and moved in.
From what i have now learned the previous tennant was told he could terminate if he found another tennant - ie, muggins me lol

Ah well you live and learn - If there is no "legal" way out i shall inform him that i will contnue to pay but wont use the office and it wll be completely vacant ( and then tell him about the high number of squatters in the area lol)

Dave

steve1980

Even if you leave it empty you are still liable for anything that happens to it, business rates, utility bills, damage etc.

sonastin

waveydave wrote: »

The thing thats bothering me - and with it being a commercial lease i dont know if this would even apply - is that I have to agree to take the lease on for a further 12 months or not ( before the 1st december) BEFORE I even know what the rent will be increased to in the 12 months followng - is that not an unfair term of the lease ?
I still have not even heard form the landlord what the increase for this year is yet.

Unfortunately it doesn't count as an unfair term. My employer has offices leased all over the country. All of the leases include rent review terms. Not all of them have break clauses. Those that do, don't necessarily have breaks at the same time as the rent review - sometimes 1 break in a 6 year lease with annual rent reviews. I would say that we have more upwards-only review clauses than up-or-down-as-the-market-dictates.

It is a commercial reality that rents are likely to increase, particularly over a 6 year arrangement such as this. You are lucky that you have an annual option to break the lease and it is a lesson learnt to make sure you understand when your notice periods are. The independent review means that your landlord has to be reasonable in his expectations for increasing the rent on the property so it isn't unfair from that angle.

My employer is stuck with an office lease for the next 3 years because they missed the break clause deadline by a couple of months last year and that is going to be subject to a rent review in the next few months. Our bottom line might be a little bit more padded to absorb this sort of mistake than yours but it is always a tough lesson to learn. - particularly as I gave them warning of the deadline in good time and now it is muggins here stuck trying to negotiate an amicable way out of it with the landlord!

The other alternative, rather than giving notice now and being subject to a lump sum payment, is to continue to pay rent ensuring that you give notice between June (i.e. 3 months after commencement of next period) and December this year to end next March. The cashflow position for a monthly rent must surely be better than a single hit of 12 months worth of rent. Just tell the landlord that you changed your mind and keep an eye on the place over the next year.

bris

The lease is perfectly legal, and normal I may add, you are in the commercial world here and the rules are stacked in the LL favour.
Yes they can raise the rent to whatever they want, but you have the right to challenge it. The rent can only be raised to a fair market value, if you can't agree between you then the arbitrator will make a decision, he will base it on the going rate for your office in the area, it will be based on location and size.

As for being done over you have not, you have taken on a lease without having a clue about them. This is why solicitors are invaluable when it comes to commercial leases. there is nothing untoward about this lease, it's perfectly normal.

waveydave

ah well you live and learn, onwards and upwards and all that - Will just keep it on for another year and hand notice in in June

cheers