splinter started this topic @ 14:40 on 28/10/2004
Hello
I bought a business a few months back and have been subletting the premises from the original owner.
The lease has now run out and the landlord has increased the rent by 200% doubling the overall overhead including rates and service charge. There are three options, pay this amount, carry on on a short term lease at what I was paying before but they can kick me out if they find somebody else to pay the larger amount or vacate the unit.
The turnover of the business will not easily cover this size of increase what do you think I should do?
Splinter
RE: Rent Review - Help Please
James Smith | 28/10/2004 04:25 PM
First things first, confirm with lawyer who helped you review the initial lease agreement to confirm they are able to do this within the terms of the lease. Presumably this would have been included within the due diligence when you purchase the businesses.
The second thing is to negotiate on the basis they will get nothing if you move out. This may simply be the opening gambit or they may want you out of the unit.
If they won’t budge on price then I think you have answered your own question - you cannot afford to pay and therefore need to start looking for new premises and take the short term lease option in the mean time.
Regards,
------------------------
James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773
---------------------------
Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT
RE: RE: Rent Review - Help Please
splinter | 28/10/2004 10:20 PM
Thankyou James for responding.
It was taken into consideration when purchasing the business, and as you say I did answer my own question. I suppose I just wanted somebody to back myself up. I just cannot believe that there is nothing to protect businesses against rent increases of such a large scale. No business can easily cover a rent increase of 200% and to see a business which has been there for many years leave through no fault of your own is just scandelous.
Darren
RE: Rent Review - Help Please
JayTee | 29/10/2004 10:29 AM
A couple of things here.
1. Rates are set by the local council so the LL can not increase as he wants.
2. Sevice charge items are not a LL's profit center - ask to see how / where the money is spent and re-charged back to you. Every penny spent should be justified. A management fee may be added but should be no more than 5 - 7.5% of the annual expenditure.
3. This leaves your rent. Rental levels are negotiable up untill you sign the dotted line. The market should dictate rental levels (unless you have a specific interest in the loacton) so spend a few hours phoning a few agents and collecting comparable evidence. If you have an alternative location at half the rent and the LL is stubborn, move out - the LL faced with an empty shop may decide to become a little more co-operative. You may find that the premises where let previously at below market level and is now just re-adjusted to market average but your research will provide guidance.
Last thing - does your short term lease have a clause opting out of the Landlord and Tenant Act 1954?
Good luck in your negotiations.
RE: RE: Rent Review - Help Please
splinter | 29/10/2004 07:37 PM
I am not sure off the top of my head if the short term lease has a clause opting out of the landlord and tenant act? What would be the implications either way?
RE: Rent Review - Help Please
shredder | 30/10/2004 01:22 PM
Splinter - this isn't a rent review it is a lease renewal. If your lease has run out you have much more control than if you are in a rent review position.
Rather than going to a lawyer go to a Chartered Surveyor - they specialise in these type of situation. They will look at the lease for you and carry out the negotiations for you. Fees will generally be cheaper than a lawyer, and linked to the rent finally agreed.
the Royal Institution of Chartered Surveyors regulates surveyors and they have a list of all firms in the country got to www.ricsfirms.co.uk. You want to get a General Practice Surveyor. Check they have experience of office lease renewals.
National firms that include Chesterton. King Sturge, DTZ and lots of others.
RE: RE: Rent Review - Help Please
emplaw | 30/10/2004 02:50 PM
It is not clear from the original posting whether the original business owner and the landlord are the same business/person. I suspect they are not and the original business owner simply assigned/sub-let the head lease to you as part of the deal.
If you would like to clarify the above, further advice can be provided.
------------------------
Lee Schwartz Lime One Ltd
www.limeone.com 01244 852550
RE: RE: Rent Review - Help Please
splinter | 30/10/2004 07:19 PM
Your suspicion is right emplaw. The original business owner is not the landlord.
RE: RE: Rent Review - Help Please
emplaw | 31/10/2004 04:30 PM
Did you get a solicitor involved in the transaction to assign the head lease to you as part of the deal or did you go forward just as a sub let without seeing the head lease?
The head lease is the original agreement between the original business owner ( tenant) and the land lord of your premises. If you arranged it just between you and the original business owner then now is the time to get legal advice on your position. If you want a quote please email me at info@limeone.com.
If there is no assignment of the lease to you then you will have no rights other than those in a sub letting agreement or in the absence of permission to assign/sub let from the landlord possibility of no rights at all.
------------------------
Lee Schwartz Lime One Ltd
www.limeone.com 01244 852550
RE: RE: Rent Review - Help Please
JayTee | 01/11/2004 11:06 AM
If the lease is within the LL & T Act your status as tenant is much more secure and the LL has less opportunities to have you leave the property.
A Chartered Surveyor is deffinately a good way to go rather than a lawyer - just make sure the are MRICS - Member of the Royal Institute of Chartered Surveyors as mentioned above. The big companies listed may not be the cheapest but they will certainly have the people for the job.
Again, as mentioned above, at this stage it is important to understand your position with whoever you pay rent to and if the sub-letting has LL written consent if this person only holds the head-lease.
