Anyone ever broken the terms of a commercial lease?
#1
Scooby Regular
Thread Starter
Anyone ever broken the terms of a commercial lease?
My wife and I took over the lease of a retail property in May 2010. We have the option to break every 2 years but must give 6 months prior notice. I think we signed on the 18th May 2010 which would make the last day 18th November 2011 (I think) oddly we don't actually have a copy of the lease with a date on it (our copy has "do not date" written on it) I'm going to take a letter of notice up to the landlords solicitors but I'm fairly sure we are too late.
We are a partnership not a limited company. Its a hair salon that was doing OK - at least paying the bills but in the last 3 months the turnover has dropped like a stone. We agreed a lease that we knew was expensive at the time but the figures stacked up fine. Sadly its just dropped off a cliff.
We took out a loan from the bank which I can cover if we close but my big concern is what damage it will do to us if we are too late to serve notice and end up breaking the terms of the lease. I can only guess that the landlord could take a charge on our house (owned with about 50% equity) but my big concern is that we lose our house.
We are a partnership not a limited company. Its a hair salon that was doing OK - at least paying the bills but in the last 3 months the turnover has dropped like a stone. We agreed a lease that we knew was expensive at the time but the figures stacked up fine. Sadly its just dropped off a cliff.
We took out a loan from the bank which I can cover if we close but my big concern is what damage it will do to us if we are too late to serve notice and end up breaking the terms of the lease. I can only guess that the landlord could take a charge on our house (owned with about 50% equity) but my big concern is that we lose our house.
Last edited by EddScott; 22 November 2011 at 07:27 PM.
#2
Im sorry to say you are in trouble, landlords sit with their fingers crossed when these dates approach. Massive school boy error to have missed the date!
Only options you really have are ro sub lease or try to negotiate your way out of the lease which will cost you £'s.
He could take you to court should you fail to pay and he would win, most landlords even make small/medium sized limited companies sign personal guarantees these days.
Have you looked into why business has dropped off? Thought about;
promotions?
New stylists?
Nail bar or other form of beautician within the salon to subsidise income?
Reducing expenditure on products?
Instead of paying staff a salary renting a chair to them? This reduces your expenditure in salaries and they pay you to be there and your wife then makes all her own money? Used to be very popular way of running salons years ago as it is mutually benefitial.
Opening hours? A lot of salons seem to close in the week and not open late, if you are determined to make it a success then evening appointments would no doubt be popular.
Chop
Only options you really have are ro sub lease or try to negotiate your way out of the lease which will cost you £'s.
He could take you to court should you fail to pay and he would win, most landlords even make small/medium sized limited companies sign personal guarantees these days.
Have you looked into why business has dropped off? Thought about;
promotions?
New stylists?
Nail bar or other form of beautician within the salon to subsidise income?
Reducing expenditure on products?
Instead of paying staff a salary renting a chair to them? This reduces your expenditure in salaries and they pay you to be there and your wife then makes all her own money? Used to be very popular way of running salons years ago as it is mutually benefitial.
Opening hours? A lot of salons seem to close in the week and not open late, if you are determined to make it a success then evening appointments would no doubt be popular.
Chop
#4
Should also add - I am not a hairdresser or have any great knowledge of them, or want to be one! However I used to pork sword a couple of birds that worked in the same salon years back.
Ah memories, they were both filthier than a 10 year old transit van.
Chop
Ah memories, they were both filthier than a 10 year old transit van.
Chop
#5
Scooby Regular
Thread Starter
Cheers mate.
I'm going to hand in the notice letter tomorrow.
The lease increases every 31st July up to 2017. We have break clauses every 2nd, 4th and 6th year. We had a new lease drawn up (based on the lease of the previous tenents) and signed it in May 2010 but the increases still occur every July. I think the original lease meant that if you were to break on the 2nd year you had to put it in writing 6 months beforehand - 6 months before 31st July 2012. I hope its 6 months before each July!!
As for reducing costs we've let one girl go (trainee so not actually losing income there) the wife isn't going to take an income for a bit and I'm going to pay in some money in each month to help cashflow and reduce supplier purchases. I think that could save as much as £1500 a month (a third of the monthly costs to keep the place open) which would definately keep the business safe. It has lost money but it would a hard push to lose £1500 a month.
If the savings keep the business going I wonder whether we should serve notice - I wouldn't want the landlord to kick us out.
I'm going to hand in the notice letter tomorrow.
The lease increases every 31st July up to 2017. We have break clauses every 2nd, 4th and 6th year. We had a new lease drawn up (based on the lease of the previous tenents) and signed it in May 2010 but the increases still occur every July. I think the original lease meant that if you were to break on the 2nd year you had to put it in writing 6 months beforehand - 6 months before 31st July 2012. I hope its 6 months before each July!!
As for reducing costs we've let one girl go (trainee so not actually losing income there) the wife isn't going to take an income for a bit and I'm going to pay in some money in each month to help cashflow and reduce supplier purchases. I think that could save as much as £1500 a month (a third of the monthly costs to keep the place open) which would definately keep the business safe. It has lost money but it would a hard push to lose £1500 a month.
If the savings keep the business going I wonder whether we should serve notice - I wouldn't want the landlord to kick us out.
Last edited by EddScott; 22 November 2011 at 08:44 PM.
#7
Scooby Regular
I have a few properties let out on commercial leases and can tell you they are very much in the favour of the landlord (thankfully)
The landlord will be able to pursue you for every penny owed (plus all expenses incurred to chase you for that money). The only time he won't get his money is if the tenant has no money/assets.
The courts also view a commercial lease very differently to a residential one. In the latter there is a bit of emotion involved ie it is the roof over someones head, in the former it is a pure business transaction.
Saying all that remember that it is difficult to rent out commercial properties at the moment, vacancy rates are high especially in secondary locations.
The landlord may well be amenable to some negotiation of the rent downwards, he may well rather receive something rather than have the property empty for god knows how long.
I have had to accept this myself recently, a 10% decrease in rent + 6 months rent free. I agreed as it was a blue chip tenant.
Good luck
The landlord will be able to pursue you for every penny owed (plus all expenses incurred to chase you for that money). The only time he won't get his money is if the tenant has no money/assets.
The courts also view a commercial lease very differently to a residential one. In the latter there is a bit of emotion involved ie it is the roof over someones head, in the former it is a pure business transaction.
Saying all that remember that it is difficult to rent out commercial properties at the moment, vacancy rates are high especially in secondary locations.
The landlord may well be amenable to some negotiation of the rent downwards, he may well rather receive something rather than have the property empty for god knows how long.
I have had to accept this myself recently, a 10% decrease in rent + 6 months rent free. I agreed as it was a blue chip tenant.
Good luck
Last edited by Dingdongler; 22 November 2011 at 10:44 PM.
Trending Topics
Thread
Thread Starter
Forum
Replies
Last Post
shorty87
Full Cars Breaking For Spares
19
22 December 2015 11:59 AM
M4RKG
General Technical
3
30 September 2015 07:51 PM
shorty87
Wheels And Tyres For Sale
0
29 September 2015 02:18 PM