Lease equity?

Notebook

Hi
A friend leased a shop from the council 20 plus years ago. The lease I understand cost about 20K.  The business now leases a year at a time, due to the original 20 plus years having elapsed.  Is there any value in the lease if you see what I mean if the business were to move on and someone else take over the lease?
Thanks

Savvy_Sue

To my uneducated mind, probably not. A year is too short a period to have much value.

But (equally uneducated) question: will the council allow hin to pass the lease on? Surely they'll want to engage with any new tenant / leaseholder?

And if they DO allow him to pass it on, what conditions will they attach? Possibly the requirement to pay if the new tenant defaults, possibly even years in the future.

It is definitely something I'd want to get proper (paid for!) legal advice on, from someone who knows this area of law

DullGreyGuy

Notebook said:

Hi
A friend leased a shop from the council 20 plus years ago. The lease I understand cost about 20K.  The business now leases a year at a time, due to the original 20 plus years having elapsed.  Is there any value in the lease if you see what I mean if the business were to move on and someone else take over the lease?
Thanks

There are two options, subject to the terms:

Reassignment - the leasee changes from your friend to the new party; absolutely will require the approval of the leasor. Your friend ceases to have any involvement if the lessor agrees and your friend can charge a one off for the privilege

Sub-Lease - will be subject to the contract and maybe also to the leasor. Effectively your friend remains responsible for the property to the leasor but can get their own leasee to pay them whatever they can get for it in the current state. The benefit can be you make a good margin for many years to come, the downside is if they default or trash the place you have to fix it.

A lot will depend on the contract, how desirable the location is and what they've put into the property. Being realistic in many cases you're simply being lucky to not to pay the remainder of your lease and avoid having to pay to return it to the state it was when you leased it. 

An associate subleased a hairdressers for many years making a modest amount each year but when the subtenant went rouge the costs wiped out all the profits they'd made.

daveyjp

Minimum term for a lease is three years, less than that is a periodic tenancy.  Your friend is probably  'holding over' on the original 20 year lease on an annual periodic tenancy, it has no value.

If they were to move out they would serve notice and a new lease would be offered to a new tenant.