Commercial Lease debt?

Guy-Brush

Hello everyone. New to the forum and not technically in debt yet, but due to my circumstances I may soon have someone chasing after me.

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 or other income. The term was 5 years with a 2 year break point (@ May 2018). I won't be able to continue up to the break point.. 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 the lease to someone else. I had a few people lined up privately but they all pulled out.

I plan to write to the landlord again to say if he doesn't allow us to surrender the lease I am going to wind the shop up, leave the place empty, clean and tidy and hand him back the keys in May. One complication is that by doing this 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! Eek. But I see no alternative. The rent is £6k per year + VAT in a big city so pretty small fry and eventually he'll be able to let the place out again.

My dream has long been to work abroad and after this disappointing experience of self employment I intend to do just that (especially with Br*xit looming) - travelling and teaching in the EU mainly. So whilst there is no 'debt' now, is there anything I can do self-preservation wise to avoid all sorts of nasties happening once I've vacated? I expect he will see me as liable for the entire period of the rent and take action against me, but he won't have my address as I will be off shortly afterwards. I never intend to own property or a business again and am otherwise solvent with a glowing credit rating.

Can anyone offer me any advice please?

sourcrates

Hi,

Aside from paying what becomes owed, no, there is nothing you can do.

If/when, you become liable for these charges, you will be written to asking for payment, ignoring that will see the debt passed to a debt collector, ignoring them will see a possible escalation where either the landlord goes to court to reclaim there losses, or he sells the debt on to a specialist debt purchaser, who will then pursue you for the full amount.

If court papers go to your old address, you could end up with a CCJ by default, you would then have to dodge the creditor, there bailiffs, and all other enforcement actions, for at least the next six years, after which you may be able to walk away from it all.

Guy-Brush

sourcrates wrote: »

Hi,

Aside from paying what becomes owed, no, there is nothing you can do.

If/when, you become liable for these charges, you will be written to asking for payment, ignoring that will see the debt passed to a debt collector, ignoring them will see a possible escalation where either the landlord goes to court to reclaim there losses, or he sells the debt on to a specialist debt purchaser, who will then pursue you for the full amount.

If court papers go to your old address, you could end up with a CCJ by default, you would then have to dodge the creditor, there bailiffs, and all other enforcement actions, for at least the next six years, after which you may be able to walk away from it all.

Thank you very much for the information.

And if I have since moved abroad? The costs of pursuing and locating me etc would not, I think, be attractive to my landlord, for whom property development is a minor sideline.

Alternatively, could I go bankrupt now and then move abroad as intended?

sourcrates

Guy-Brush wrote: »

Thank you very much for the information.

And if I have since moved abroad? The costs of pursuing and locating me etc would not, I think, be attractive to my landlord, for whom property development is a minor sideline.

Alternatively, could I go bankrupt now and then move abroad as intended?

Cost would be a factor in locating you, yes.

Currently you have all options open to you, if, as you say your business is going to fail big time, then going Bankrupt would be about the only thing you could do to limit the effects of this in the future.

You would first need to check that all of your (potentially) outstanding debts would be covered by Bankruptcy, its then just a case of paying the fee, and cooperating with the OR appointed to you.

Guy-Brush

sourcrates wrote: »

Cost would be a factor in locating you, yes.

Currently you have all options open to you, if, as you say your business is going to fail big time, then going Bankrupt would be about the only thing you could do to limit the effects of this in the future.

You would first need to check that all of your (potentially) outstanding debts would be covered by Bankruptcy, its then just a case of paying the fee, and cooperating with the OR appointed to you.

Thanks again. Yes they would. Of course, I don't know if the landlord will take any action over this lease and indeed when and how much he would go to me for (assuming we cannot come to an agreement beforehand).

I have other debts, approx £17.5k in a personal loan and 0% credit card which I am paying off with no problem.

I believe if I move to reside in another EU country I can no longer go bankrupt in the UK. I would need to apply before I go. What happens if I don't and am pursued abroad for this lease debt?

Spatton

Also in part depends if you're operating as a sole trader or a Limited Co. - just walking away from a business, even if it is failing, isn't quite so straightforward. From what you describe it sounds like you're a sole trader (?). Being pragmatic your landlord may well decide cost of pursuing you outweighs the benefits of seeing the money. If he was prepared to let you reassign the lease, then it sounds like he'd be at least open to another conversation to try and sort it out before you necessarily take the step of bankruptcy. A lot of businesses struggle at this time of year because no-one wants to spend after Christmas. It takes a lot of time and effort to build up a business - much more than any of the so-called self-help books on the subject lead you to believe!

Guy-Brush

Spatton wrote: »

Also in part depends if you're operating as a sole trader or a Limited Co. - just walking away from a business, even if it is failing, isn't quite so straightforward. From what you describe it sounds like you're a sole trader (?). Being pragmatic your landlord may well decide cost of pursuing you outweighs the benefits of seeing the money. If he was prepared to let you reassign the lease, then it sounds like he'd be at least open to another conversation to try and sort it out before you necessarily take the step of bankruptcy. A lot of businesses struggle at this time of year because no-one wants to spend after Christmas. It takes a lot of time and effort to build up a business - much more than any of the so-called self-help books on the subject lead you to believe!

Thanks, yes it is extremely difficult! Unfortunately my shop is very specialist and I have opened it in a new city to me, in quite the wrong part of the city for this sort of thing! Not only that but Br*xit has pushed up the price of a lot of the imported items, and in all fairness I never had enough money to see myself through the bad times.

Anyway.. I will speak to the landlord and see what he says. If he plays hardball I might play the trumpcard of bankruptcy since, regrettably, it will also potentially help free me of my other debts. Or at least it will allow me to pay people back in a manageable way and get on with my plans.

I am indeed a sole trader and signed the lease in my own personal name, with no guarantors.