Assigning a Pub/Commercial Lease and the Pitfalls,
Part 3, other issues.
The Pub Co’s created another problem, if there were cash flow problems and the rent was not paid, the whole family would be evicted in a very short space of time because it’s a commercial property, whereas domestic accommodation is totally different, it can take months to evict a bad tenant through due legal process or has money problems.
The majority of commercial properties do not have domestic accommodation, pubs restaurants, hotels are different, they do in many cases have domestic accommodation.
This makes many hard working people vulnerable to Corporate Landlords and leases with domestic accommodation.
Especially tied leases, the Pub Co’s etc., any sort of financial problem they stop the limited credit that they offer and put the lessee on cash with order, causing dire cash flow problems, without a serious injection of cash.
The lessee puts the lease up for sale and gets some interest from a keen assignee, they have to provide suitable business plans and references to take over the lease to the Landlord.
Some unscrupulous Pub Co’s use delaying tactics and the would be assignee loses interest, they then approach the would be assignee and offer a direct sale, assuming that the lessee is desperate at this stage or they have repossessed the pub for failing to pay the rent.
We have had a number of complaints about certain unnamed Pub Co’s doing this, the occasional one we managed to stop.
An Area Manager subsequently resigned, I met him at a Trade Show and he said he was fed up with the dirty tricks used when people wanted to assign a lease, he couldn’t get out fast enough, not a good recommendation.
The demand for Pub Co leases has dropped and some companies are offering deals that should have been brought in years ago, instead of destroying a large sector of the Industry.
An interesting technical point, the commercial side of a pub and the domestic side are rated separately, they are very occasionally leased separately.
Since you can be evicted for failing to pay the rent on commercial property almost immediately, if you pay the rent on the domestic side or don’t pay it, I know getting possession of domestic property for non payment of rent can take months, you need to read the small print in your lease for full clarification.
If the landlords delaying tactics in respect of your potential assignee are putting him off and they pull out, the Landlord may in many cases take the property back, the unscrupulous will give you a very low figure on Fixtures and Fittings (F&F) and find good reasons why your deposit is not returned.
Your lease on Tied Leases will normally say that the F&F should remain with the pub and not be removed, regardless of how much you may have improved them, the only articles you can remove are personal items and legally they have to be identifiable as personal, like the majority of domestic accommodation, unless listed in the original F&F.
The Pub Co’s originally claimed a failed lessee cost them £30K, now they know exactly what to do and it can be a serious Cash Cow for the Pub Co and similar Landlords.
With the change in legislation some companies are pushing shorter leases, they are also claiming that the property is for their own use.
With long leases, the following Link is worth reading, Compensation on Pub Co’s taking property for their own use LINK
With leases where the lessees have been there for seven years or fourteen years and the commercial property is taken back for the landlords own use, it does not have to be the same lessee, it has to be a continuous lease or a renewal of the same lease.
The compensation is equivalent to the rateable value, after seven years or a double the rateable value for fourteen years maximum of the lease being held.
A number of companies have been offering totally new leases to get out of paying compensation, it must be the same lease, so ensure that your assignee understands this, if it is a long running old lease.
Hopefully, certain aspects of the new legislation will give the lessees more protection from unscrupulous landlords in regard to tied leases.
Be assured that any other questionable activities passed on to us will be published, sadly many are just technically legal but morally unacceptable.
Authorised Guarantee Agreement (AGA) LINK