Leasing new shop when whole building up for sale

Goldfinch_1997

We have a shop on the edge of a small town and have been keeping an eye out for suitable premises in a more central location. 

We think we’ve found one that suits us and is in a great location for the business, but have just noticed that the landlord has decided to sell the building (retail unit plus 2 flats above).  

Has anyone gone through that (I.e. a change of landlord midway through their lease).  

What protection would we have if the new landlord had different plans for the retail unit?

tightauldgit

Provided you have a lease in place then the new landlord would have to comply with the terms of that lease and nothing would change but you should check the specifics of what the lease says with regards the landlord's right to terminate etc.

If your lease is near expiry you should check if the new owner intends to continue as is - you should have a right to extend your tenancy but they can refuse this under certain circumstances (e.g. if they are planning to redevelop the units) 

Goldfinch_1997

Thanks for that.  

We did think the lease was quite a short lease (normally retail leases here are around 5 years with a break after 2).  The one on offer here is for 3 yrs and a break after 2.  That may well be a sign of the times.  

The likelihood is that we will want to be in for about 10 yrs (if all goes well) and don’t really want to be in a position of having to move on before then (due to the costs involved).
I guess any landlord (current or new) could change things but what can we do to protect our aim of staying around 10yrs?
Could we request a longer contract and maybe 2 break clauses (one at 2 and one after say 6yrs) and what are the pros and cons of doing that?

DullGreyGuy

The levels of protection for commercial leases is much less than residential and not only that but its possible for the landlord to make it conditional that you waive your rights to some of the protections which again isnt possible for residential. 

You really should get a copy of the proposed lease and have your solicitor to review it and in particular with your concerns in mind. I'm not an expert in commercial property leases but have seen plenty of other types of commercial contracts with change of control clauses or poison pill clauses (to almost effect a CoC clause where one isnt possible).

tightauldgit

Goldfinch_1997 said:

Thanks for that.  

We did think the lease was quite a short lease (normally retail leases here are around 5 years with a break after 2).  The one on offer here is for 3 yrs and a break after 2.  That may well be a sign of the times.  

The likelihood is that we will want to be in for about 10 yrs (if all goes well) and don’t really want to be in a position of having to move on before then (due to the costs involved).
I guess any landlord (current or new) could change things but what can we do to protect our aim of staying around 10yrs?
Could we request a longer contract and maybe 2 break clauses (one at 2 and one after say 6yrs) and what are the pros and cons of doing that?

You can request anything you want but the landlord can say no. 

If they are actively looking to sell it may well be that they don't want to commit to a long lease that would mean any prospective buyer having to honour it for 10 years. All you can really do is ask.  

There isn't much you can do to protect your aim of staying for 10 years if the landlord doesn't want to commit to that but everything is up for negotiation. The only thing I would say is that you seem to want to have the flexibility to get out of the lease from your side but want the landlord to be tied in - which seems skewed in your favour. So what is the landlord getting to balance that out?

Savvy_Sue

Can't stress enough the advice to look at this with a solicitor who works in this field.

lincroft1710

Personally, I wouldn't entertain it if I was hoping to stay for 10 years.  

daveyjp

Tenanted buildings are bought and sold every day, all that changes is the landlord.  As a commercial tenant on a lease you have protection under Landlord and Tenant Acts.

The complication here is the building is for sale so the seller may not be in a position to negotiate and agree a new lease if there are buyers in the wings.

As regards terms thats for you to negotiate.  Any building owner would generally be happy if a tenant wanted a 10 year lease.  Once you get into break clauses you need advice on the best approach.

tightauldgit

daveyjp said:

Tenanted buildings are bought and sold every day, all that changes is the landlord.  As a commercial tenant on a lease you have protection under Landlord and Tenant Acts.

The complication here is the building is for sale so the seller may not be in a position to negotiate and agree a new lease if there are buyers in the wings.

As regards terms thats for you to negotiate.  Any building owner would generally be happy if a tenant wanted a 10 year lease.  Once you get into break clauses you need advice on the best approach.

You need to exercise care though because often landlords will try to get tenants to opt out of the protections of the Act. 

HampshireH

There is no way I would be signing a short term lease on a unit the landlord is looking to offload when aiming to stay 10 years.

The fit out costs and any dilapidation costs at the end could potentially be high depending on what your business is and twice over in a short space of time could be crippling (again depending on the business).

Goldfinch_1997

Thank you all for your feedback.  We spent the last couple of days establishing fit out costs etc.  Just waiting for a couple of quotes and if all comes back and we’re happy we’ll start talking contracts and getting a solicitor involved.