In a tenants market it is foolish for a tenant of commercial premises to not have a break clause incorporated in a new medium or long term lease. I recently heard of a retail tenant who signed up to a ten year Full Repairing and Insuring lease with a personal guarantee given on the lease by the owner of the business.
The business went into liquidation after a very short period of time and the landlord naturally came after the business owner for the rent on the basis of the personal guarantee. Now I don’t know many people who can afford to pay out £18,000 a year for the rest of a lease on a building they don’t want to or can’t occupy. Don’t forget that as well the nice Local Authority only allow six months empty rates allowance so he even had to pay the business rates.
A break clause in the lease after perhaps 3 years would have allowed the business to see if the premises suited them. After three years the owner or business could have given notice to terminate the lease under the break clause if the building was too small, too big or it was simply in the wrong location for their business.
In the situation above the failure to negotiate the lease terms properly may ultimately see the beleaguered former tenant go into personal bankruptcy. A sad end for the business owners dreams. All caused by not seeking the proper advice from a Chartered Surveyor or a good solicitor before entering into his lease.
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