Scooby Soon!

Is a commercial property worth more with or without a sitting tenant?

I have a lease on a retail shop and this morning an estate agent turned up with a tape measure and said that the owner was putting it up for sale. The owner has not contacted me to let me know he is selling.

I would like to get out of the lease early (3 years left) so what would normally happen in this situation, is the owner likely to ask me to move out when its sold (ie is the building worth more when empty?).

The owner has not been helpful over the last few years, I presume I dont have to let anyone in to the building (ie new owner or estate agent) if its not been written in to my lease contract?

Longjing

Depends on the tenant, but usually the tenanted value is much more than the vacant possession value.

I'd be amazed if access for the owner isn't written into your lease. I'd also expect the landlord to be able to sell the freehold without telling you - happens quite often.

I doubt very much that the landlord will ask you to surrender the lease, unless he's selling it for development or something. You'll just get a letter telling to pay the rent into a different account (or possibly the same one if it's a collection/management agent).

Scooby Soon!

I forgot to add that I think we are paying rent below market rate would this go in our favour (so to speak?) I know several people have expressed an interest in buying it previously but wanted it empty. Considering the sale price will be around £350,000 its a listed building and we are paying £15k a year would that be a good investment (is there some sort of formula to work from?)

richardg

"sitting" tenant is the wrong term. you have a lease (inside or outside the provisions of the '54 Act?), so the terms of your occupancy are reasonably clear - ie you're not a 'sitting tenant' in the way that someone occupying a residential property under a regulated tenancy may be for instance, but that's a completely different story.

the issue here is the value of your covenant - ie with the property let to you, is the owner likely to receive the rent on time every time without deduction? as an example, the same property let to tesco would be worth more than if it was let to a local bloke running a small business. what it comes down to is the return the investor will accept on their outlay - they are more likely to accept a lower return from a "more secure"/more desirable tenant.

your landlord will need to refer to your lease if he wants you out. you should also check the terms and be aware of the detail. i would expect that the lease (or licence if it's outside the Act) will include the right for the landlord or anyone acting on his behalf to enter the property at reasonable times with reasonable notice for the purposes of inspecting the property

I would suggest you;
1) read your lease
2) make notes on your rights and the landlords rights
3) make notes on any break clauses and rent review dates, ensuring you note any relevant notice periods for these
4) why don't you make the landlord an offer? it you outgrow the property, you could always re-let it.

Longjing

If you want to move, the fact that your rent is below market might encourage the landlord to accept a surrender without you paying for the privelege. Ask and see?

Scooby Soon!

One more question, we never signed the lease but as we have been paying the ren i assume that means we agree with the terms?

To be honest we dont really use the property anymore, we wanted to sublet the property to someone else and our landlord said that we couldn't as he was worried about any dilapadation work not being done (even though we said we would do it and photograph etc). We also offered to find a new tenent and pay all fees and sign them up for a new lease, he refused) So i am currently waiting to see whats going to happen over the next few days,

I suppose if there was a new person trying to buy it and we put "Going out of business" and "Bankrupt sale" in the window the landlord might finally talk to us!

Dunk

iTrader: (1)

If you haven't a signed lease how have you got 3 yrs left ?

D

richardg

did you have a lease on the property before the lease you haven't signed?? (ie are you holding over?)

Scooby Soon!

We had an original 10 lease that we signed with a 5 year break we needed to stay for one more year after the break so we had no choice but to stay. The new lease/contract for the last 5 years had new updates and revisions we didnt agree to them or sign it (contract came through about 9 months after the 5 year break clause. The owners solicitors kept sending it to us and demanding we signed it but we never did...

richardg

i couldn't be sure without seeing the detail, but you may be holding over. in which case you are occupying the premises under the terms of the original agreement (unless you may have done anything different since the landlord believes the second 'term' commenced). if you are holding over, then this will affect the freehold value

speak to a solicitor and see where you stand. if you are affectign value, then you may be in a good position to acquire the property at a good price or to demand some form of consideration if you quit the premises

Chrisgr31

As Richardg says you need to gather up your paperwork and go and see either a lawyer or a surveyor. If you had a 10 year lease with a 5 year break and didn't action the break then (assumming the 10 years aren't up) you will be occupying the property under the original lease.

If you did serve a break notice but didn't go then it will be up to the lawyers to argue whether you still occupy under your 10 year lease or have a periodic tenancy.

And in whose judgement is the rent too low? Occasionally Landlords would prefer having an established tenant paying slightly less than the percieved full market rent, rather than a flybynight paying the full market rent. You don't need a property empty very long to start losing the benefit of a higher rent!