assigning a commercial lease

[herstonbell]

Hi

My husband and I have had our offer accepted on a business that has with it 2 flats above the shop that we will run.

The business has been in operation for 21 years and the current lease was signed in 1998 and was for 12 years and includes the 2 flats.

As someone new to the buying of not only a business but also a commercial lease (FR&I lease) we would be grateful if anyone could answer the following question(s).

We have had an initial meeting with a solicitor who told us that the current lease would have to be assigned to us.

Is this our only option or are we able to approach the landlord to ask for a new lease to be drawn up between ourselves and the landlord.

Also, we are about to have a survey done on the property and even to my non professional eye I can see that there is work needed on the place. The current owner of the lease says that the property wasn't in that good a state when he took it on but the lease does say that it has to be returned to a tenantable state. Is this something that we have any influence over or is it between the current lessee and landlord?

Also, as we wish to reinstate one of the flats so that it can be rented out we will need to install central heating as well as fit a new kitchen. Would we be able to negotiate on the rent as we would be improving the property for the landlord?

Any advice would be much appreciated - sometimes it's difficult getting a straight answer from the solicitor!

Cheers
Emma

[yeahbutno]

Everything is negotiable!!


You could appraoch the landlord to ask to draw up a new lease - we have recently done exactly that with a new tenant taking over an existing lease; basically both sides wanted to include some new terms, and were happy to agree the compromise.

However, I'm not quite sure what you are seeking to gain? As soon as the lease is assigned to you, it is treated (legally) as though you were the tenant from day 1. You have no fewer rights or obligations than if it were yours originally. Assuming the lease wasn't written outside of the terms of the Landlord & Tenant Act, you will also be entitled to a new lease when the current one expires. (make sure you check though!!!)

As far as the second flat is concerned, you may well be able to persuade the landlord to reduce the rent if you are improving his property, although he will not be obliged to do so. I suggest checking the existing lease very carefully, because I would have thought it likely that the tenant is actually responsible for keeping the flat in good condition anyway, in which case you should ask the existing teneant to put it right before you complete (or agree some kind of concession). The fact of the matter is that as soon as your name is on the lease, YOU are probably responsible for all maintainance of the property, and the landlord can insist that you do so.

Finally I would check to ensure that there is provision in the lease to sub-let the flats.

Good luck!

[herstonbell]

thanks for info.

We had got the impression from our solicitor that we could not negotiate a new lease if we wanted to as we were not the lessees. I would have thought that when buying a business and a lease you would be able to approach the landlords and if necessary negotiate a new lease.

The current lease does allow for sub-letting of flats on a shorthold tenancy basis. We would like to seek a variation of this and for the lease to allow for holiday lets as well.

The main reason for wanting a new lease is that the current one only lasts for a further 4 years and we would like at least 12 to 15 years so that any money invested in the flat in doing it up would at least be realised in that period of time. There's no point us taking on a shorter period.

Can I therefore ask, if the lease is assigned to us, is the current lessee obliged to return the flat to an agreed state when it is assigned to us or will it be left to us at the end of the lease.

Thanks for the good luck! Just trying to find a good surveyor in Dorset - very expensive quotes at the moment!

Emma

[yeahbutno]

...expensive, but probably well worth it!

You will have to take on the old lease, but there is nothing to stop you tearing it up 5 minutes later and replacing it with a new one IF both parties are happy.

I still don't think you have anything to gain. When the assigned lease expires in 2010 you have legal security of tenure, which means that except in very exceptional circumstances, you are entitled to a new lease of the same duration again (and again in 2022 etc). The landlord will be entitled to the market rental value at that time, but most commercial leases carry a rent review clause in any case.

It is important to ensure your surveyor and solicitor take a good look at the lease, to make sure there are no nasty surprises in there, but as long as the original lease wasn't written outside of the scope of the Landlord & Tenant Act with regard to security of tenure (and it's fairly clear even to the untrained eye if it has was) then you in many ways you have a lease that can be renewed ad-infinitum.

It is also worth remembering that in the (hopefully unlikely) situation that the business does not do well, you will still remain liable for the rent until the end of the lease - if you extend it at this stage, you also extend your liability.

As far as the condition of the flat is concerned, again you might need some guidance from your surveyor. In your situation though, I would say that as things stand the current tenant is responsible for making the flat good, UNLESS he has an agreement with the landlord that he doesn't have to keep that particular part of the building maintained. As soon as the lease is assigned, YOU are taking over that responsibility. On that basis, I think you are perfectly entitled to expect the current tenant to make good before you pay him any money - or agree to a discount from the sale price to compensate.

All my own opinion of course, and I'm not a solicitor or surveyor!

[yeahbutno]

I should add that I see no reason why you can't contact the landlord at this stage to ask his/her thoughts on things such as holiday letting. If he is happy, a very simple one-page deed of variation to the lease is all that should be required.

You may have to go through the agent if there is one.