mamoon2

The opportunity has arisen to buy a sandwich shop at a knock down price. The only thing i'm not sure on is the lease....

The current owner has 8 years left on the lease but has told me he owes the landlord 4-5 months rent. Where do i stand on taking over the lease? is it a case of him signing over the 8 years to me and sorting out the debt himself afterwards or do i just sign a fresh lease with the landlord for, say 15-20 years.

Basically, do i sign a new lease with the landlord or just take over the current lease. What happens about the money the current owner owes?

By the way i'm only buying the equipment NOT the actual business as a going concern.

Thanks in advance

Luminous

iTrader: (3)

I think you will have to negotiate with the landlord. I'm guessing that the terms of the lease the current tenant will have signed will have a no subletting clause. If you were to make arrangements with the current tenant I think you would fall foul of this clause.

I'm no expert on this mind...

mamoon2

I'm not going to sublet, i would only consider assignment or a fresh lease. But just need to know how i will be affected by the current tennants debt if at all

Chrisgr31

The Landlord is going to want his 4-5 months rent from someone! The procedure will be dependent on what the lease says.

The 2 options are that the existing teant surrenders his lease to the Landlord, and the Landlord may want a payment to receive it back, and he'll certainly want the back rent. The landlord will then grant a new lease to the new tenant, and of course he may decide to market it so you may not be the chosen one! In addition if the existing tenant has made any improvements to the shop they will be reflected in the rent, and of course depending when the last rent review was market rents might have increased. So therefore the new lease could be granted at a significantly increased rent.

The alternative is that you take over the existing lease. There are two options, an assignment or a sub-lease. From your point of view an assessment is probably better as at least you'll know the Landlord is getting his money! A sub-lease would also be at the current market rent which may be more than the passing rent.

The second option is that you take an assignment, but the Landlord will want the outstanding rent paid before he agrees to this. One way or another you'll have to pay it! As the money you pass to the existing owner will go on to the Landlord.

In reality your best option is to take an assignment but that backrent will have to be paid first. Seek advice from a good property lawyer, and/or a Chartered Surveyor.

mamoon2

This is what i was thinking but obviously i won't be handing over any money until a new lease is signed and not sure the current tennant has the ability to pay the outstanding balance.

I will speak to a solicitor about this i think, anyone any idea how much they charge for overseeing an assignment?

fatherpierre

Surely the lease is at the knockdown price due to the outstanding rent??

mamoon2

Well maybe, its at a knockdown price because the owner is in a lot of debt elsewhere and needs a cash sale quick. All i need to know is whether the current tenant needs to settle his debt with the landlord BEFORE the assignment can take place?

al4x1

Best way if you're interested is to talk to the landlord. if you were buying the business as a going concern then obviously you could just take on the existing lease. If you're not then the landlord will want the back rent and technically could hold the existing guy to the remainder of the lease so easiest way out for him would be to go bust assuming its set up as a ltd company. You of course run the risk the landlord will try and tie you down to a long term lease or even see it as a way of getting rid of the current guy if there is a better offer about

Chrisgr31

What you do is rather than paying the existing tenant £x you pay him £x less the backrent owed to the landlord. You ten pay the backrent direct to the Landlord and take the assignment.

M444GY

iTrader: (72)

u make an agreement with the landlord about the backrent . but u will have to probably pay the landlord a goodwill deposit if its a going concern that is for taking on the lease . its just security for him really

Chrisgr31

To make it clear the Landlord will not approve the assignment until the backrent is paid. Is the purchase price higher than the rent owed? If so the deal is doable, if not there is a problem!

Ghetto Dude3

or the fact that its not made the chap enough money to pay his rent in the first place!!

alarm bells should be ringing IMHO

mamoon2

Not an issue at all mate, but seems a bit clearer now about the lease