Business going broke, will landlord chase?

wozzza72 · 24 April 2018 at 11:45AM

Hi
My partner has a Ltd business she is the director of and she has a fully repairing lease on a commercial property. She has run the business for 5 years now and the lease expires in September but she is closing the business down the end of this month as she is behind on the rent and other bills. She is guarentaur on the lease. The landlord is particularly aggressive.
The property is in need of some repairs due to it being old (roof leaking) and with the outstanding rent owed already and also between now and Octobers rent until the lease terminates, the landlord could be after her for the best part of £20,000.
Fortunately she has no assets, no money in the bank, no car worth any money etc.

My question is would the landlord bother to make my partner bankrupt if there is nothing to take?

Thank you in advance.

Browntoa · 24 April 2018 at 11:57AM

Is your home mortgaged , in both names ? Is there a joint bank account

Then there's assets

Landlord may well chase the debt either way , bankruptcy may be the only option . She either does it now voluntarily or go through a pointless legal process and do it down the line.

I'd do it now if there are no assets

jonesMUFCforever · 24 April 2018 at 11:58AM

Did she guarantee the lease personally or as a director of the company?

If she guaranteed the lease personally then he might well pursue the debt.
If it is the Ltd company who is guaranteeing the lease (unlikely?)then if the company is struck off with no assets he cannot pursue.

wozzza72 · 24 April 2018 at 12:17PM

We rent. No assets at all but yes we have a joint account , just wages go in. There are no savings at all.

She is a personal guarentaur unfortunately.

What is the point of perusing the debt if there is no money to take?

pjcox2005 · 24 April 2018 at 12:31PM

wozzza72 wrote: »

We rent. No assets at all but yes we have a joint account , just wages go in. There are no savings at all.

She is a personal guarentaur unfortunately.

What is the point of perusing the debt if there is no money to take?

It will sound harsh but I'd imagine it maybe they want a court process to decide that you have no assets rather than relying on the word of someone who has just broken one agreement with them and left them out of pocket.

The other side may be emotionally of the landlord thinking they've at least tried to do something to recover the debt etc

wozzza72 · 24 April 2018 at 12:49PM

Yes that is fair enough.
So if it goes to court, they will find there is nothing to have. What happens then? This will cost the landlord money to do as well I'm assuming. Will it cost us anything?

PaulL2 · 24 April 2018 at 12:54PM

It's very common for business premises rentals to require a personal guarantor, otherwise there's no protection for the landlords if the limited company goes under. I was in a similar position to your wife and in fact it was the business lease which was what prompted me to go BR because whilst my other debts were solvable it was hanging over my head and I couldn't come to an agreement with the landlord. He got nothing in the end, except the ability to lease the place out to somebody else a bit quicker than had he taken legal action against me, but I got closure which was priceless.

I'd recommend she went bankrupt now. As I'm sure you already know, business rental contracts are written very much in the favour of the landlord and even if you got a solicitor or somebody to write to them saying they have nothing to be taken, they probably have a debt collection company keen to take the debt and make your life hell on their behalf just in case.

Do you really want the stress of letters, bailiffs, CCJs etc for a minimum of 6 years (maybe more I think if courts get involved) when you could get rid of all worries with the click of a button? Even if she has no assets now, who's to say she won't get a very well paid job sometime in the next year which would lead to an IPA and some income for the landlord. This is why they're unlikely to take your word for it that you have no assets. Maybe you might win the lottery

Of course, you might find the landlord has had a personality change and is willing to accept the keys from you with the building in a bad state?

System · 24 April 2018 at 1:34PM

wozzza72 wrote: »

Yes that is fair enough.
So if it goes to court, they will find there is nothing to have. What happens then? This will cost the landlord money to do as well I'm assuming. Will it cost us anything?

The landlord can petition to have her declared bankrupt. Some creditors, especially individuals, will find that the cost of bankrupting a debtor is worthwhile in order to get at least some satisfaction that the debtor isn't going to be walking away scot free unscathed. It won't cost you anything in bankruptcy fees but it will cost you a lot in your life going forward for the next 6 years due to the fallout of being declared bankrupt such as having to go on pre-pay gas and electricity on a higher tariff, having to put down a deposit to have a phone in the house, more expensive car insurance as you have to declare you've been made bankrupt in the past on an application, any future borrowing being at a far higher rate of interest.

wozzza72 · 24 April 2018 at 1:41PM

So basically it comes down to the landlord and how vindictive he wants to be! I know he wants the property back asap anyway to sell it for redevelopment. My partner is the only business in the property, it has a large number of empty flats above it also. It's worth £1.2m, so £20k will be a drop in the ocean.

PaulL2 · 24 April 2018 at 2:26PM

Tarambor wrote: »

The landlord can petition to have her declared bankrupt. Some creditors, especially individuals, will find that the cost of bankrupting a debtor is worthwhile in order to get at least some satisfaction that the debtor isn't going to be walking away scot free unscathed. It won't cost you anything in bankruptcy fees but it will cost you a lot in your life going forward for the next 6 years due to the fallout of being declared bankrupt such as having to go on pre-pay gas and electricity on a higher tariff, having to put down a deposit to have a phone in the house, more expensive car insurance as you have to declare you've been made bankrupt in the past on an application, any future borrowing being at a far higher rate of interest.

I'm not sure being petitioned for bankruptcy will cost them "a lot more in your life going forward" than what they are already currently facing - a failed business, no assets and at least £20k owed to a vindictive landlord (apologies to OP... I was in a similar situation). In fact going bankrupt will possibly place them in a better situation, depending what the landlord does - which none of us on this board can predict, I'm afraid!

Also it's unusual for bankruptcy to result in pre-pay energy meters, unless one of the creditors is the energy company you use at home. I don't believe they would even be notified of your BR if all payments are up to date (as with mobile phones - they just carry on). Maybe if you moved house they would do a credit check at the new place and insist on a prepay meter, guarantor or deposit up front.

Similarly with car insurance, some companies will insist in payment in full, others won't even do a credit check nor ask the question 'have you ever been bankrupt'. A simply search on this site will give you information and recommendations based on others' findings.

Future borrowing.. well yes obviously this will be affected by bankruptcy, but I'm not sure how the OP will avoid a credit rating hit if they already have unpaid bills. Whether he takes legal action over the lease or not, the landlord will forward these to the OP's home address as he will have no intention of paying overdue business rates etc on the OP's behalf.

In my case, my business rates bill for the period after I had left the premises eventually found its way to my parents' house in another part of the country. The council had somehow got a previous address for me via another council.

robber2 · 24 April 2018 at 2:37PM

while you still can I would suggest you break any and all financial associations you have with your partner; eg joint bank account. At least if she goes down your own credit worthiness should be unaffected.

Rob

Business going broke, will landlord chase?

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