Allowing time for tenant to sell business (corner shop)

[colinhunn]

Commercial tenant holding-over on lease (expired 2000!). Has always refused all my efforts to sign new lease.

Is now trying to sell his business (I have seen his advert on-line). I have previously served a Section 25 Agreement on him which I have now extended by 3 months. He now has to vacate the property by June 24th 2013 (or apply to the court for a new lease which he doesn't want to do). I have also served a Schedule of Dilapidations on him which he says he will attend to.

My question is, once the dilaps have been attended to, do I have to allow him more time to sell his business if necessary or do I have the right to find a new tenant before he has found a buyer for his business? If I take the latter course, he will have to leave before he has concluded a sale of his business. Informed advice would be most appreciated.

[MrJohnnyB]

How long did you extend the S25 notice for? Your tenant has a right to a new lease, but if they do not protect their position on a correctly served s25 then they may lose such rights.

[colinhunn]

Thanks for replying Johny. I extended the S25 notice by 3 months.

[MrJohnnyB]

If the tenant does not take action to protect their position they will lose their rights of renewal and you can remove them from the property at the expiration of the S25 notice. It all depends how well advised they are. Worth noting, however, obviously you'd not be entitled to any of their fixtures or fittings (Unless they formed part of an obligation of the lease).

[rentreviewspecialist]

The tenant's business sale is nothing to do with the landlord and (per case law) it is no part of the LTA54 to confer upon the tenant a saleable asset. Unless the tenant protects his renewal rights before the end date in the s25 notice as extended by you, he would have no legal right to remain in occupation of the premises.

Assuming you're not opposing renewal, you are only obliged to renew to the existing tenant or to the assignee should the existing tenant assign the holding over lease, with your consent, before the end date. If the existing tenant loses his renewal rights then whether you'd want to grant new lease to the buyer of his business is entirely up to you. You might be better to require the existing tenant to leave (assuming renewal rights unprotected) and then grant a lease to a buyer for which you might be able to get a premium (capital payment) as well - the buyer might well pay something to get his hands on the residual goodwill that naturally attaches to the premises.

If the dilaps are not done to your satisfaction before the tenant vacates then the tenant has no right to do any work afterwards (without your permission) and you'll have to choose between a claim for damages or carrying out the work yourself and recovering the actual cost from the tenant. Damages would be capped per s18 (LTA1927) by what is known as the diminution in the valuation of the reversion, namely the lower of the cost of the repair and the difference in value between the property in the state of repair and condition that the left has left it in and the state, etc as envisaged by the lease. If you opt for doing the works and recovery then you avoid the LTA27 procedure. However, there's a protocol for both and frankly if you don't know what to do re dilaps issues then it's best to use an experienced surveyor.

Until you know for certain whether the tenant has protected renewal rights, it's not advisable for you to find a new tenant, because you could be done for slander of title.

In outline, the landlord owns the building, not the tenant's business. Where the the value or marketability of the tenant's business at the premises requires a secure term of lease, it's up to the tenant to negotiate/agree a secure term. It is not up to the landlord to offer to provide a secure term, you may wish to in order to safeguard your rental expectations, etc, but that's an investment decision.

Incidentally, if the tenant leaves the premises before he has concluded a sale of the business, then it could be reasoned he has lost his renewal rights through not being in occupation of the premises. The qualification for renewal rights doesn't just mean having a lease inside the LTA54.

[colinhunn]

Thank you very much for your very comprehensive advice. Another issue here is that I live over 100 miles from my property and do not want to see it empty at any time (for the usual reasons well documented in this forum). There is much to ponder!! Thanks again.