Break Clause? How to get rid of current commerical tenant [Archive]

tavollbracht

16-03-2006, 17:31 PM

Hi, we took on a property last september that has two shops in it (as well as flats, which is what we know).

The shops have not had a rent increase in over three years and last month we sent a letter out with a new lease agreement, and a rent increase schedule. We decided to increase her rent over eight months to give her more of a break.

Anyway, to put it nicely she has been difficult, and we now just want her to go. With the previous owner the only 'lease' she has was a 12 month hand written lease with a one month break clause that expires in June. However, we are wondering what the law states. We know that there are certain rules that exist without a written agreement in residential laws, so is there the same in commercial??

Can we just give her a month's notice? If so, what notice do we give her and what are we obliged to say to her about why she has been given notice.

Any help or advice would be much appreciated. A copy of some sort of notice to quit would be awesome, if it is needed.

Thanks!
Tim & Amy

yeahbutno

16-03-2006, 21:57 PM

Can opened, worms everywhere!

The whole situation is a bit of a legal grey area IMO because of the existing hand-written lease (which presumably is a fairly basic one-pager?). Both parties obviously chose not to seek professional advice before signing, because no legal adviser or surveyor on this earth would recommend either a landlord or a tenant entering into such a contract. Unfortunately for you, it might be yourselves that it comes back to bite on the arse, and it sounds like your own solicitor should have flagged up the issues surrounding this existing lease before you bought the property. If it comes to it, you may have a claim against them for negligence.

Commercial leases are VERY different from residential ones in several very imoportant ways, and it is certainly worth trawling back through a few threads on this section of the forum to get some idea of situations which crop up quite regularly.

One of the most important differences between commercial & residential, is that generally speaking the tenant has a right to renew their lease once it expires (assuming that they have kept rent up to date, and not breached the lease in any other ways). This is so that the tenant can continue to run their business, which may have had collossal start-up costs, and carry a large value of stock without having to worry about suddendly having no premises to trade from. This right is laid down in the Landlord and Tenant Act, and the majority of commercial leases come under the the scope of the Act.

It is however possible to agree a commercial lease outside the terms of the L&T Act, and this would usually mean that the landlord can take back possession of the premises at the end of the lease. BUT...if this happens the tenant is asked to sign specific paperwork (separate from the lease) to confirm that they understand the implications of what they are agreeing to sign, and the Landlord must also serve a notice on the tenant to the same effect.

How does all of this relate to your position? Well, it's difficult to say with absolute certainty, as much depends on exactly what is included in the handwritten lease. Specifically, the "break clauses" you mention may become relevant; it is very unusual for a landlord to have a break option, that would normally be a tenant option only. However, I reckon the likely situation is probably this:-

In the eyes of the law, your tenant has a valid legally binding Commercial Lease expiring in June. If you wish to "evict" in June, and your tenant resists, then you will be relying on the existing handwritten lease being classed as excluded from the L&T Act in terms of tenure. If this case ends up in court, I would very much doubt that the judge would rule that the lease was anywhere near "watertight" enough, and would work on the basic premis that the handwritten lease DOES come under the jurisdiction of the L&T Act.

This would mean that your tenant will have a right to a new lease (probably of the same length as the original), and indeed will retain the right to continuous renewals upon each expiry. You will however have the right to charge rent at the market rate, which would ultimately be decided by an independent valuation if you are unable to agree. You can't though simply decide to put the rent up at your own descretion to a value of your own choosing. It would be wise to seek to put rent review clauses into the new lease.

I think one thing we can say for certain is that you can't just give your tenant a month's notice and kick her out. You could of course take a chance and do that anyway, and you MAY drop lucky and your (obviously quite naive) tenant may not choose to pursue the matter any further. However, it would be a collosal risk, as she would probably be able to successfully sue you for "relief from forfeiture" (which effectively means unfair eviction) with the court awarding her all of the costs, which would be very substantial.

I think you need some good quality professional advice from a solicitor who specialises in commercial property.

And never ever ever EVER sign a commercial lease handwritten on a scrap of paper!!:D