Commercial property - Lease has ran out, how to increase rent?

davemorton

I inherited a commercial property (corner shop) last year that is rented out (I originally owned 25% of this, but after the death of a partner, now own 100%, I never used to have any hands on dealing with it). 
The (10 year) lease ran out the year previously, but the other owner of the property was not in a good place health-wise at the time, so the lease never got extended. 
I got a solicitor to draw up a new lease after discussion with the tenant, but now the tenant seems to be avoiding signing the new lease coming up with various excuses such as solicitor is no use/retired, so looking for a new one.  This has gone on for 4 month now. 
I want to increase the rent when the new lease is signed, so am presuming that is the reason for this avoidance. 
How can I go about increasing their rent without the new lease being signed? Do I just have to give a months notice of the increase?  The original lease had a rent review wrote into it at the 5 year mark, but the rent was never increased, so they are still paying the same rent they were paying 12 years ago, and it was a low rent at the time. 
I know things are different for commercial properties, but hoping someone can give an answer to this. 

user1977

If you've already engaged a solicitor, why can't they advise you on this? I presume the property is in England/Wales given your previous threads.

You'd normally be agreeing the new rent in principle with the tenant before documenting it, you can't just give them notice of what it's to be (unless there's something highly unusual in the existing lease!). Is an increase in rent realistic? Retail rents aren't necessarily going up or even flatlining.

saajan_12

davemorton said:

I inherited a commercial property (corner shop) last year that is rented out (I originally owned 25% of this, but after the death of a partner, now own 100%, I never used to have any hands on dealing with it). 
The (10 year) lease ran out the year previously, but the other owner of the property was not in a good place health-wise at the time, so the lease never got extended. 
I got a solicitor to draw up a new lease after discussion with the tenant, but now the tenant seems to be avoiding signing the new lease coming up with various excuses such as solicitor is no use/retired, so looking for a new one.  This has gone on for 4 month now. 
I want to increase the rent when the new lease is signed, so am presuming that is the reason for this avoidance. 
How can I go about increasing their rent without the new lease being signed? Do I just have to give a months notice of the increase?  The original lease had a rent review wrote into it at the 5 year mark, but the rent was never increased, so they are still paying the same rent they were paying 12 years ago, and it was a low rent at the time. 
I know things are different for commercial properties, but hoping someone can give an answer to this. 

What did the original lease say about rent increases and what happened at the end, ie does the tenant have to leave, or assumed to continue rolling, notice, etc? What happens to their internal fixtures & fittings?

Unlike residential tenancies, there's much more reliance on the actual contractual terms rather than a statue as the idea is that businesses would have thought about their specific terms rather than an individual needing a level of protection regarding their residence. 

531063

davemorton said:

I inherited a commercial property (corner shop) last year that is rented out (I originally owned 25% of this, but after the death of a partner, now own 100%, I never used to have any hands on dealing with it). 
The (10 year) lease ran out the year previously, but the other owner of the property was not in a good place health-wise at the time, so the lease never got extended. 
I got a solicitor to draw up a new lease after discussion with the tenant, but now the tenant seems to be avoiding signing the new lease coming up with various excuses such as solicitor is no use/retired, so looking for a new one.  This has gone on for 4 month now. 
I want to increase the rent when the new lease is signed, so am presuming that is the reason for this avoidance. 
How can I go about increasing their rent without the new lease being signed? Do I just have to give a months notice of the increase?  The original lease had a rent review wrote into it at the 5 year mark, but the rent was never increased, so they are still paying the same rent they were paying 12 years ago, and it was a low rent at the time. 
I know things are different for commercial properties, but hoping someone can give an answer to this. 

Write a letter to tenant explaining from this date xx.xx.xx the rent will be increasing to £xx and see what reply you get.

davemorton

saajan_12 said:

davemorton said:

I inherited a commercial property (corner shop) last year that is rented out (I originally owned 25% of this, but after the death of a partner, now own 100%, I never used to have any hands on dealing with it). 
The (10 year) lease ran out the year previously, but the other owner of the property was not in a good place health-wise at the time, so the lease never got extended. 
I got a solicitor to draw up a new lease after discussion with the tenant, but now the tenant seems to be avoiding signing the new lease coming up with various excuses such as solicitor is no use/retired, so looking for a new one.  This has gone on for 4 month now. 
I want to increase the rent when the new lease is signed, so am presuming that is the reason for this avoidance. 
How can I go about increasing their rent without the new lease being signed? Do I just have to give a months notice of the increase?  The original lease had a rent review wrote into it at the 5 year mark, but the rent was never increased, so they are still paying the same rent they were paying 12 years ago, and it was a low rent at the time. 
I know things are different for commercial properties, but hoping someone can give an answer to this. 

What did the original lease say about rent increases and what happened at the end, ie does the tenant have to leave, or assumed to continue rolling, notice, etc? What happens to their internal fixtures & fittings?

Unlike residential tenancies, there's much more reliance on the actual contractual terms rather than a statue as the idea is that businesses would have thought about their specific terms rather than an individual needing a level of protection regarding their residence. 

The original lease says the review date is the 5th anniversary and the full review date is the tenth anniversary of the term commencement date (Feb 2012).  
Lease states "At the end of the term the tenant shall return the property to the Landlord in the repair and condition required by this lease."
As for internal fixtures/fittings, it says "At the end of the term, the Tenant shall remove from the property all fittings and chattels belonging to or used by it". 

I am not wanting to evict the tenants, I just wish to have a new lease signed, and increase the rent by a small amount, as the amount they are paying is ludicrously small (approx 50% of market rent).  If I have to wait another 3 years to increase the rent, I guess I will just have to suck it up (if the rent can only be increased once every 5 years, and if not done at the time, it is just tough luck).

GDB2222

You either play hard ball or you let them drag this out forever. I think you have to start making noises about evicting them as there’s no proper lease in place. Miraculously, all their problems with their solicitor will disappear!

Of course, whilst you make it clear that you want them to stay on, you have to have some resolve to carry out the threat to evict if you have to. If you would never evict them, that’s very nice of you, but expect them to take advantage of your kindness.

I’m assuming here that they can afford the new rent and you are keen to get the money.  

davemorton

user1977 said:

If you've already engaged a solicitor, why can't they advise you on this? I presume the property is in England/Wales given your previous threads.

You'd normally be agreeing the new rent in principle with the tenant before documenting it, you can't just give them notice of what it's to be (unless there's something highly unusual in the existing lease!). Is an increase in rent realistic? Retail rents aren't necessarily going up or even flatlining.

The solicitor has already been paid, they drafted the new lease, and sent it out. To be honest, I cant really afford to pay for more assistance from them if I dont need to.  Yes, I believe the rent increase is very realistic, they have not had an increase in 12 years, and I am only proposing an increase of approx 10%, where as if it was going up by inflation over that time, it would be about 65%  

user1977

davemorton said:

user1977 said:

If you've already engaged a solicitor, why can't they advise you on this? I presume the property is in England/Wales given your previous threads.

You'd normally be agreeing the new rent in principle with the tenant before documenting it, you can't just give them notice of what it's to be (unless there's something highly unusual in the existing lease!). Is an increase in rent realistic? Retail rents aren't necessarily going up or even flatlining.

I believe the rent increase is very realistic, they have not had an increase in 12 years, and I am only proposing an increase of approx 10%, where as if it was going up by inflation over that time, it would be about 65%  

But that doesn't suggest you're looking at market rents. There's no particular reason why rents would go up with inflation - there obviously wasnt any imperative for it to go up at the 5 year review.

In any event, like I said you need to agree the new terms in principle with the tenant before worrying about how to implement them. And if you fail to agree anything, figure out what the current status of the lease is, if it's being held over.

davemorton

user1977 said:

davemorton said:

user1977 said:

If you've already engaged a solicitor, why can't they advise you on this? I presume the property is in England/Wales given your previous threads.

You'd normally be agreeing the new rent in principle with the tenant before documenting it, you can't just give them notice of what it's to be (unless there's something highly unusual in the existing lease!). Is an increase in rent realistic? Retail rents aren't necessarily going up or even flatlining.

I believe the rent increase is very realistic, they have not had an increase in 12 years, and I am only proposing an increase of approx 10%, where as if it was going up by inflation over that time, it would be about 65%  

But that doesn't suggest you're looking at market rents. There's no particular reason why rents would go up with inflation - there obviously wasnt any imperative for it to go up at the 5 year review.

In any event, like I said you need to agree the new terms in principle with the tenant before worrying about how to implement them. And if you fail to agree anything, figure out what the current status of the lease is, if it's being held over.

From what I have read up on, if the tenant stays after the lease expires, it is being held over, so I believe they are.  Yes, market rents are just under double what they are paying looking at similar properties, it was a cheap rent in the first place 12 years ago when the original lease started, and never put up because the effort/cost made it not worthwhile.  It isnt an expensive rental property, the solicitors fees I paid to get the new lease drawn up cost approx 4 months rent. 
I had discussed a new lease with them, and the duration of the new lease, and at the time they were happy for it to go ahead.