Ten-year business lease with break clause?

[hcd]

Hi, iam new here, so please go easy with me :D
Iam looking to open a retail shop, and have asked for a 3 year lease, as i do not want to be tied to a long lease, if business is not good.

The estate agents got back to me, and suggested that the minimun years is 10 years, but i can have a break clause at the 3rd year therefore less risk, and is just the same as a 3 year lease.

I was not confident if i did take his offer of a break clause, after the 3 years if i stayed. I would be tied down to a further 7 years.

The estate agent now suggested i sign for a 10 year lease, with a break clause after 3 years with a rolling lease

After 3 years i can have a rolling lease, where i can opt out after the years any time after giving 6months notice.

So i was wondering if rolling leases are any good, or has the estate agent got something hidden??? :rolleyes:

Thanks

[yeahbutno]

First of all to answer your question you posted on the other thread...setting up the lease can be extremely quick if both parties have the will and ability to get it done.

My experience though is that both sides need proper legal advice (I really wouldn't advise signing a commercial lease either as a landlord or a tenant without it having been checked over by a GOOD solicitor who specialises in commercial property matters). This process can add significant delays, but is worth the wait.

I am not familiar with a "rolling lease" as such , although if the terms are as you state them then it appears to be pretty low-risk for you, in fact the landlord seems to be leaving himself wide-open to losing his tenant at any time between years 3 and 10.

There is one possible catch I can think of. The Landlord may be proposing a lease which is written outside the Landlord & Tenant Act in terms of your tenure at the end of the lease. A "normal" commercial lease is renewable by you at the end of the lease on all of the same terms as the existing one (other than the rent). This provides your business with the security that you won't be asked to move against your will in 10 years' time. If this is the case here, it may not necessarily mean that signing the lease is a bad idea, but you would need to consider very carefully what your situation will be in 2016 if the business is flourishing - is it the kind of business which can change location without affecting trade? Or is the location critical?

I think the fact that the landlord is offering such loose terms on tenure could well mean that he is looking to regain possession at some point in the short to medium term, makes this possibility quite likely. Tread carefully, and as I say, get some proper legal advice before you sign up. Hopefully others can add more....

Good luck!

[riskybusiness]

I am looking to lease and raised the question of lease breaks with my commercial property solicitor and he recommended a rolling break lease. If possible have the rolling break running from the start as the first 3 years of business are the ones when you find out if it is going to work or not.

[yeahbutno]

Agree with that advice Risky, but I very much doubt that most landlords would be willing to offer breaks in the first couple of years for a brand new tenant. I certainly wouldn't.

The other side of that coin is that if the landlord IS willing to offer a break so early, he is probably finding the building very difficult to let - which should set a whole set of alarm bells ringing for a new business wanting to operate from those premises.