is it hard to get out of a lease?

peppy007

hey, new to this so hi every1,

im in a bit of a situation...i own my own business which is located in the stephens green shopping centre...things were going fine until the recession hit and am finding it difficult now...

the rent is due at the end of the month and usually i would have funds left over to buy stock, pay wages etc but this time round, after i pay the rent im left with feck all...

we asked the landlord for a rent reduction and were told 'no'..id gladly give the keys back and call it a day but we have signed a 5 yr lease...

am i screwed? will they come after me if i simply can no longer pay the rent, close up and give the keys back?

partyguinness

3 questions:

1. Did you personally sign the Lease?

2. Or was it in a company name? and if so, did you give a personal guarantee?

3. How long left to run?

peppy007

partyguinness wrote: »

3 questions:

1. Did you personally sign the Lease?

2. Or was it in a company name? and if so, did you give a personal guarantee?

3. How long left to run?

both..we are a limited company so the landlord wanted a personal guarantee ..otherwise they wernt interested. Tried to get my solicitor to get the landlord towaive this with no luck.

3yrs left..

murphaph

Do you have any real property in your name (family home or other investment property)?

If the answer is NO then the law in Ireland is a rogue's charter and it's relatively easy to walk away from your contractual debt albeit dishonourable if you can at all avoid it. If the answer is YES then the landlord may well pursue you in court for a judgment against you and if succesful he may get a judgement mortgage registered against your property, which ultimately prevents you from remortgaging or selling your property without discharging the debt. It's a long slow process for the landlord however and he will have to pay legal costs in the hope that someday you need to sell up/remortgage.

The landlord could turn to the county sherrif (once he has his judgement against you in the circuit court) to come round your house and seize goods but the sherrif is almost as good as useless and will never force entry into your house to do this so a lot of cerditors don't even bother contacting the sherrif.

Get back in touch with your landlord and if needs be, show him the books and that you are in dire straits and try to negotiate with him. There's no point in him having a vacant unit and no rent and legal bills trying to follow you around if the alternative is a reduced rent and an occupied unit.....presuming your unit is not the only empty one in the centre?? If the landlord is very confident that he can find an alternative tenant to you at the current rate, he will obviously tell you to get lost if you ask for a reduction.

Best of luck!

DubTony

peppy007 wrote: »

we asked the landlord for a rent reduction and were told 'no'..id gladly give the keys back and call it a day but we have signed a 5 yr lease...

Commercial landlords need to get real. Having said that, they aren't the only ones. Their friends in the legal prefession could do with a reality check as well. The "upward only" rent review is as good as a thing of the past, yet a brand new lease a friend was presented with last week had this very clause in it. When he instructed his solicitor to get back to the landlords solicitor and have it removed, his solicitor told him that it was unlikely to be removed as it's standard. He's deciding whether to find a new location or a new solicitor. :rolleyes:

stepbar

What's your business out of a matter of interest?

itsonlyme

I know tenants in the general Grafton St/Stephens Green area that have gone to their landords recently and looked for a rent reduction for the next 12 months due to the recession and the landlords have obliged them.

This is probably due to the fact that the landlords know they wont get another tenant in this market and the rent reduction is temporary.

mick.fr

Surely the collapse of the economy, the recession etc, can be assimilated to exceptional circumstances and as in any proper contract, there should be something about that so you could get out without the risk of being sued.

The "Cas de force majeure" you know what I mean? The french sentense is often used in English direcly.

Very often I have this kind of elements in contracts I sign, you never know. Always cover your @ss with the unpredictabe, especially when you have an obligation to deliver.

Just my 2 cents, I am not a sollicitor

MrPillowTalk

If you have no assets then the personal guarantee is largely worthless, if you do then Im afraid short of appealing to the landlords nature you dont really have an option but to stick it out.

Tbh if the business really is a non runner and you liquidate then it is unlikely the landlord will act on the personal guarantee unless you have large personal wealth as truth be told it is hard to get a court to bring a judgement against someone personally that arises from genuine commercial mishap.

Lplated

MrPillowTalk wrote: »

Tbh if the business really is a non runner and you liquidate then it is unlikely the landlord will act on the personal guarantee unless you have large personal wealth as truth be told it is hard to get a court to bring a judgement against someone personally that arises from genuine commercial mishap.

Not legal advice, BUT - this is wrong, and a very dangerous risk to take.

The only basis for a court to refuse judgment is if there is a valid defence to the application for judgment, and commercial mishap is not an accepted defence (unless by some miracle it was specifically included as such in the lease/contract).

You also cannot rely on the landlord not seeking judgment on the basis you don't have large personal wealth - there are some creditors whose policy is to get judgment anyway on the basis that they may enforce it in the future if your situation improved.

You're only real avenue is negotiation with the landlord. One suggestion may be to get together with other tenants in the Centre and form a kind of 'lobby group' - you may find that the landlord is more open to negotiation when faced with a mass walk out/mass refusal to pay rent or whatever - but this is a 'policitical' rather than legal solution.

delllat

a personal guarantee is not worth a fcuk if you have nothing to guarantee it with

the blood out of a stone thing.......


I have seen people walking away from leases and there isnt a ****load a landlord can do

if he can be arsed bringing a judgement against you he may win it but itis more hassle for nothing depending if you have nothing to be judged against ao he might not bother

If you know the business is going under and a rent reduction is only going to prolong things then id give him back his shop and let him rent it to someone else

theres no point waiting til u owe a few months rent and then give himm back the keys or wait til he kicks you out

cormie

So if a personal guarantee is useless if you have no property, what's to stop somebody who has the likes of a house/lamborghini, just giving the deeds to a spouse/brother/somebody they trust and continuing to drive the car and live in the house?

Darragh29

My advice OP is never give a personal guarantee when getting into a lease agreement, especially if you are trading as a company. At the end of the day, trading involves risk and you running a limited company offers you protection from that risk to a certain degree. I've been asked to offer a personal guarantee with a lease agreement before and I have refused to do so, on one occasion resulting on the deal falling through. My take on this is that running a business involves taking on a risk and your landlord is also taking on a risk when leasing a premises to you. This is an integral part of business and this thing in recent years where people try to insulate themselves 100% from risk, I don't agree with.

If your business doesn't work out, against your very best effort and your best expectations, then don't be in a situation where your personal situation is compromised, as in you could have someone coming after your house. I know this is advice on the basis of foresight, at the end of the day, a 5 year lease term is a short term lease on the scale of things and your landlord has no options at the moment. It is unlikely in the short term that he will secure judgement against you or get another tenant, so he only has one real option and that is to work with you to resolve the situation and this means renegeotating the rent.

Darragh29

Lplated wrote: »

One suggestion may be to get together with other tenants in the Centre and form a kind of 'lobby group' - you may find that the landlord is more open to negotiation when faced with a mass walk out/mass refusal to pay rent or whatever - but this is a 'policitical' rather than legal solution.

I was going to suggest something along the lines of this. You could "shame" him into being more realistic with you.

murphaph

cormie wrote: »

So if a personal guarantee is useless if you have no property, what's to stop somebody who has the likes of a house/lamborghini, just giving the deeds to a spouse/brother/somebody they trust and continuing to drive the car and live in the house?

If you legally gave your house to your brother he'd be liable for substantial Gift Tax on it! It's also a highly risky thing to do anyway...you're giving your home away to someone else who you may have a big falling out with down the road. VERY few debtors will even contemplate risking this strategy. Giving it to your spouse is also highly risky (marriages fail, especially under financial strain!) but it would achieve nothing really as the courts would see the property as still being your property as a married couple.

murphaph

Darragh29 wrote: »

My advice OP is never give a personal guarantee when getting into a lease agreement, especially if you are trading as a company. At the end of the day, trading involves risk and you running a limited company offers you protection from that risk to a certain degree. I've been asked to offer a personal guarantee with a lease agreement before and I have refused to do so, on one occasion resulting on the deal falling through. My take on this is that running a business involves taking on a risk and your landlord is also taking on a risk when leasing a premises to you. This is an integral part of business and this thing in recent years where people try to insulate themselves 100% from risk, I don't agree with.

If your business doesn't work out, against your very best effort and your best expectations, then don't be in a situation where your personal situation is compromised, as in you could have someone coming after your house. I know this is advice on the basis of foresight, at the end of the day, a 5 year lease term is a short term lease on the scale of things and your landlord has no options at the moment. It is unlikely in the short term that he will secure judgement against you or get another tenant, so he only has one real option and that is to work with you to resolve the situation and this means renegeotating the rent.

As a landlord who's had a tenant overhold and cause significant loss of income I can understand 100% why landlords (including me) insist on a personal guarantee. It gives you that bit more certainty because believe me...when business turns down, the landlord soon becomes the lowest priority because if you stop paying your suppliers or utilities, they just cut you off and you're finished, whereas a landlord has an arduous process of going to the district court and then the circuit court to eventually get an ejectment order, all the while getting no rent and the tenant can keep trading.

maxwell smart

You could ask your landlord for a rent rebate. This is a nice little agreement that I've entered into for 3 premises our company are leasing. Basically he has not reduced the rent, however he is giving us a 50% rebate on our monthly payments. So he has not set a precident on reducing the rent and all 3 landlords still have a tenant, who should be able to do away with the rebate in 12 months time (hopefully).

itsonlyme

A friend of mine is looking to lease a unit at the moment, 35k per year, which is very reasonable for where it is. The landlord's Solicitor was looking for a Personal Guarantee and I told my friend not to give it and tell the Solr. that he has never given one in his life and was not going to start now!!!.

I told him to do rent the property through their company.

Does anyone know if a company signs a lease and things go pear-shaped with the business mid way through the lease, is the company then liable for the payment of rent for the duration of the lease?.

murphaph

itsonlyme wrote: »

Does anyone know if a company signs a lease and things go pear-shaped with the business mid way through the lease, is the company then liable for the payment of rent for the duration of the lease?.

Yes, of course! A lease is a contract-the company promises to pay rent to the landlord for x years and the landlord promises to make his property available exclusively to the tenant for the same period. The landlord sacrifices control over his property for the duration of the lease. Would it be any more acceptable if the landlord got a better offer and told the tenant to get lost?

DubTony

murphaph wrote: »

Yes, of course! A lease is a contract-the company promises to pay rent to the landlord for x years and the landlord promises to make his property available exclusively to the tenant for the same period. The landlord sacrifices control over his property for the duration of the lease, ensures that the tenant signs a full maintenance lease, therefore being forced to paint the building every 3 or 4 years, fix everything that goes wrong whether it's his fault or not, pay all insurance costs associated with the building so that if the roof blows off the landlord won't have to stump up to fix it, and should the tenant break the lease, for any reason whatsoever, the landlord, having insisted on a personal guarantee, will get a lean on the tenant's house. Would it be any more acceptable if the landlord got a better offer and told the tenant to get lost?

Fixed that for you Philip.

Darragh29

murphaph wrote: »

As a landlord who's had a tenant overhold and cause significant loss of income I can understand 100% why landlords (including me) insist on a personal guarantee. It gives you that bit more certainty because believe me...when business turns down, the landlord soon becomes the lowest priority because if you stop paying your suppliers or utilities, they just cut you off and you're finished, whereas a landlord has an arduous process of going to the district court and then the circuit court to eventually get an ejectment order, all the while getting no rent and the tenant can keep trading.

A lot of people got into investment property in the last 10 years thinking it was a safe bet and normal business risks that are understood by real business people, didn't apply to their investment. Now you're learning a fundamental lesson in business that there are no safe bets out there and you're as exposed to risk and potential loss as every other business out there. Did you not understand, when you invested in property, that if your tenant defaults on the lease, you have to go to court to have the matter dealt with???

itsonlyme wrote: »

A friend of mine is looking to lease a unit at the moment, 35k per year, which is very reasonable for where it is. The landlord's Solicitor was looking for a Personal Guarantee and I told my friend not to give it and tell the Solr. that he has never given one in his life and was not going to start now!!!.

I told him to do rent the property through their company.

Does anyone know if a company signs a lease and things go pear-shaped with the business mid way through the lease, is the company then liable for the payment of rent for the duration of the lease?.

Even if you are trading as a corporate body, if you give a personal guarantee and your company cannot meet its obligations under the terms of the lease, then you become personally liable for the rent due to the landlord. This means that judgement can be sought against you personally for the debt, because you have personally guaranteed the lease in addition to your company signing the lease. First rule of getting into a lease agreement is NEVER EVER give a personal guarantee.

murphaph

DubTony wrote: »

Fixed that for you Philip.

Depends on the lease of course Tony but yes, if a landlord can get away with spending as little as possible and maximising his turnover, he will.....as would anyone in any businesses. It's ALL about thrashing out the best lease from each side's perspective. Prospective tenants are free to deal with another landlord and as Daragh correctly points out....property ownership/investment as a business brings its own pitfalls which can and are very expensive to sort. I'm not leveraged in the way Daragh seems to think I and I'm lucky....many landlords who took a chance and invested in property in recent years will of course now lose their investment.

Buying property to let is a risky business-totally accept that and I know the legal pitfalls. It's business like anything else. It's for this reason that a landlord will seek to limit that risk by seeking personal guarantees (and usually gets them if the property has a high profile)

To be honest, I'd consider myself a 'decent and honourable' landlord (both commercial and residential) and I repair my property asap when I'm notified of any issues. I am negotiating a new commercial lease at present and it will not contain such onerous conditions as you mention. I will commit to repairing the fabric of the building-the tenant will only be responsible for general upkeep. I know there are other landlords out there with a bad attitude, same as many tenants. Let's let the good landlords find the good tenants and leave the chancers find each other.

Darragh29

murphaph wrote: »

Buying property to let is a risky business-totally accept that and I know the legal pitfalls. It's business like anything else. It's for this reason that a landlord will seek to limit that risk by seeking personal guarantees (and usually gets them if the property has a high profile)

It is a risky business now, but many people didn't think it was over the last 10 years when the banks were telling every gully that came though the bank door, that it was a "no brainer!" I will never understand people who invest in property. If everyone just bought what they needed for themselves, we'd be a lot better off than we are now. This crap over the last few years of hoovering up residential and commercial property just so you can say that you have it, has us in the mess we are now in with our economy. It was completely selfish carry on that we will spend the next number of generations trying to sort out...

OP, if someone asks you for a personal guarantee, walk away. It's a tenants market now and will remain so for a good while yet. Upwards only rent reviews, Full Repairing and Insuring (FRI) leases, these are all a thing of the past now that the birds have come home to roost for our national property hero's who have wrecked our economy.

murphaph

I had a big reply but I won't. Suffice to say, landlords provide a service the world over. People can deal with whomever they like or they can buy their own premises if they don't want to rent.

DubTony

Darragh29 wrote: »

First rule of getting into a lease agreement is NEVER EVER give a personal guarantee.

That's a great point Darragh, but there are things to consider.

Take my business. If I see a c-store that's badly run and I think there's the strong possibility that I can improve business (by improve I mean at least double the turnover), I'll have to make an offer to the tenant before I ever see the lease. After that's been thrashed out, I then have to negotiate with the landlord. If he demands a personal guarantee, I either give that or walk away, but by walking away I give up on the opportunity that I've identified. The fact that most landlords want personal guarantees reduces the number of oportunities out there if you're never willing to sign that guarantee. Sometimes you need to play with the hand you're dealt.

Now don't get me wrong. I don't agree with personal and bank guarantees. I agree that most landlords have a risk averse attitude and that's the reason they are in property, they see it / saw it as a safe bet. No business is or should be risk free. We set up companies for many reasons and one of those is to protect ourselves if things go pear-shaped. But with so many suppliers and landlords trying to insulate themselves from normal business risk, we either run the added risk of bankrupting ourselves because a property owner feels that he shouldn't have to worry about how he pays his mortgage, or we don't trade.

Catch 22 ?

Darragh29

DubTony wrote: »

That's a great point Darragh, but there are things to consider.

Take my business. If I see a c-store that's badly run and I think there's the strong possibility that I can improve business (by improve I mean at least double the turnover), I'll have to make an offer to the tenant before I ever see the lease. After that's been thrashed out, I then have to negotiate with the landlord. If he demands a personal guarantee, I either give that or walk away, but by walking away I give up on the opportunity that I've identified. The fact that most landlords want personal guarantees reduces the number of oportunities out there if you're never willing to sign that guarantee. Sometimes you need to play with the hand you're dealt.

Now don't get me wrong. I don't agree with personal and bank guarantees. I agree that most landlords have a risk averse attitude and that's the reason they are in property, they see it / saw it as a safe bet. No business is or should be risk free. We set up companies for many reasons and one of those is to protect ourselves if things go pear-shaped. But with so many suppliers and landlords trying to insulate themselves from normal business risk, we either run the added risk of bankrupting ourselves because a property owner feels that he shouldn't have to worry about how he pays his mortgage, or we don't trade.

Catch 22 ?

I agree with you there Tony. In an ideal world, the playing field would be more level. The problem with starting up a business in Ireland is that you very often get a gimp like mentality from banks and landlords, this kind of "take it or leave it" attitude. Thankfully this seems to be getting erroded now, as banks and landlords are being brought back down to the cloud that the rest of us have been living in over the last number of years.

OP, if you are starting up a business, you are already probably risking your own capital. Say you're investing 50K in a start-up. Your landlord will probably want his 1st quarter rent up front in advance. If you're in a 40K a year rent situation, you're handing over 10K before you even see the keys...

All business involves risk and if you are dealing with a landlord who doesn't understand risk and wants to have the option of chasing you out of your family home if your business doesn't work out, then the best thing to do from the outset is avoid ending up in a situation like this by keeping your business and personal life separate.

murphaph

Darragh29 wrote: »

a landlord who doesn't understand risk and wants to have the option of chasing you out of your family home

Knowing a bit as I do about this stuff....this never happens. No court will make an order of sale for an unsecured debt. (A bank gets repossession as they are the first charge on the mortgage loan, above the occupier, and are in fact the real owners until the mortgage loan is redeemed). An order of sale sought by a landlord is pointless on a mortgaged property as the bank gets first dibs on the money-their mortgage loan must be redeemed before the landlord/creditor would get a penny as the bank is the first charge on the mortgage. Also, the courts will have made an installment order on the tenant long before this step, often a token amount of a few dozen euro a month and so long as the debtor tenant maintains these payments, no further action is possible. It is simply not a viable option for landlords to seek what you suggest. Technically possible-practically impossible. Landlords usually just lose out in the real world Darragh, which is why they have reacted with the tightest leases they can produce. At the end of the day though, a tenant can default on their rent an take literall years to eject. Who do you really think the law favours? If the law (both in residential and commercial) was a bit more balanced and defaulting tenants could be ejected in a reasonable timeframe then landlords might be a bit more 'relaxed'.

This is all a legacy of a reactionary set of judgements made after independence which were made in reaction to british absentee landlords. These mostly don't exist anymore yet the court precedence means landlords are not well protected by law, not nearly as well protected as tenants. Believe me....I am currently down a sum in the tens of thousands from ONE tenant who decided simply not to pay his rent. He is still trading in my premises. The law says I must wait until I get my order for possession before I can just go in and fcuk him out. But if you want to carry on believing that landlords all look like this then carry on...

Darragh29

murphaph wrote: »

Knowing a bit as I do about this stuff....this never happens. No court will make an order of sale for an unsecured debt. (A bank gets repossession as they are the first charge on the mortgage loan, above the occupier, and are in fact the real owners until the mortgage loan is redeemed). An order of sale sought by a landlord is pointless on a mortgaged property as the bank gets first dibs on the money-their mortgage loan must be redeemed before the landlord/creditor would get a penny as the bank is the first charge on the mortgage. Also, the courts will have made an installment order on the tenant long before this step, often a token amount of a few dozen euro a month and so long as the debtor tenant maintains these payments, no further action is possible. It is simply not a viable option for landlords to seek what you suggest. Technically possible-practically impossible. Landlords usually just lose out in the real world Darragh, which is why they have reacted with the tightest leases they can produce. At the end of the day though, a tenant can default on their rent an take literall years to eject. Who do you really think the law favours? If the law (both in residential and commercial) was a bit more balanced and defaulting tenants could be ejected in a reasonable timeframe then landlords might be a bit more 'relaxed'.

Not at all, commerical property prices (and on the same basis, commercial property rents), have been driven sky high by opportunistic investors in recent years. This has all fed into us being uncompetitive as an open economy, and now we are all paying the price for this rampant greed that has been going on in recent years with regard to property acquisition in Ireland.

You conveniently neglected to mention the fact that someone who gave a personal guarantee can be chased for judgement secured against equity in a personal residence. They can have a judgement made against them that can be enforced at some future date.

The smart thing to do is research your business plan well and maximise your chances of success and if someone asks you for a personal guarantee, say, "next"...

murphaph

Darragh29 wrote: »

Not at all, commerical property prices (and on the same basis, commercial property rents), have been driven sky high by opportunistic investors in recent years. This has all fed into us being uncompetitive as an open economy, and now we are all paying the price for this rampant greed that has been going on in recent years with regard to property acquisition in Ireland.

Property is just a commodity Darragh. You buy, sell lease it like anything else. The only difference is that land cannot be manufactured. Please note that property prices have skyrocketed in places other than Ireland....including Poland where many of our jobs have disappeared to!
You seem set on blaming landlords for all the ills in irish society and that's you prerogative but it's simply not the case. You never said whether or not you'd ever pushed your margins to a point you didn't really need so I assume you have...like many (most?) businesspeople around the world in the last decade of CREDIT FUELED decadence.

Darragh29 wrote: »

You conveniently neglected to mention the fact that someone who gave a personal guarantee can be chased for judgement secured against equity in a personal residence. They can have a judgement made against them that can be enforced at some future date.

I didn't forget it. I mentioned it in a previous post! It is a wholly different matter to secure judgement against a debtor who wants to walk away from their debt and to "chase that person out of their family home" which is what you suggested is a regular occurence. It's not regular and it in fact never happens. Are you now suggesting that someone should be able to open a business, fail in that business and walk away from the debts that business took on with complete impunity? Do you not feel that leads to wreckless behaviour and poor management? How would you feel if one of your debtors owed you many tens of thousands of euro and they wished to walk away, would you not attempt to secure judgement against them or would you happily go down the tubes with them? If you were a landlord you'd seek personal guarantees too.

Darragh29 wrote: »

The smart thing to do is research your business plan well and maximise your chances of success and if someone asks you for a personal guarantee, say, "next"...

If possible, yes. As Tony says though, in the real world most landlords will seek a personal guarantee and won't deal otherwise, especially as we enter recession. Some landlords with less prominent sites may deal with no personal guarantee if he's had a long void period.

MrPillowTalk

Lplated wrote: »

Not legal advice, BUT - this is wrong, and a very dangerous risk to take.

The only basis for a court to refuse judgment is if there is a valid defence to the application for judgment, and commercial mishap is not an accepted defence (unless by some miracle it was specifically included as such in the lease/contract).

You also cannot rely on the landlord not seeking judgment on the basis you don't have large personal wealth - there are some creditors whose policy is to get judgment anyway on the basis that they may enforce it in the future if your situation improved.

You're only real avenue is negotiation with the landlord. One suggestion may be to get together with other tenants in the Centre and form a kind of 'lobby group' - you may find that the landlord is more open to negotiation when faced with a mass walk out/mass refusal to pay rent or whatever - but this is a 'policitical' rather than legal solution.

I wasnt offering legal advice only my own personal experience, I have quite a lot of commercial property, on some of it I have personal guarantees and some of it I don't. The main reason for the guarantee is to make a tenant think twice before renaging on the lease terms. If someone walked on a lease and after conducting searches they had assetts sure I would try and recover the debt, however if they had no personal wealth why would I go about spending extortionate ammounts on legal fees (high court costs circa 15k per day before I get the solicitors bill) to secure a judgement that might at some point in the future become exerciseable, it makes no sense.

People walk on leases all the time, the upshot is the landlord gets stung thats just the nature of the business unfortunately, legally pursuing potless people on personal guarantees is foolish. Even in cases where you secure judgement on say someones private residence its very hard to ever execute as the bank allways have priority charge.

delllat

MrPillowTalk wrote: »

I wasnt offering legal advice only my own personal experience, I have quite a lot of commercial property, on some of it I have personal guarantees and some of it I don't. The main reason for the guarantee is to make a tenant think twice before renaging on the lease terms. If someone walked on a lease and after conducting searches they had assetts sure I would try and recover the debt, however if they had no personal wealth why would I go about spending extortionate ammounts on legal fees (high court costs circa 15k per day before I get the solicitors bill) to secure a judgement that might at some point in the future become exerciseable, it makes no sense.

People walk on leases all the time, the upshot is the landlord gets stung thats just the nature of the business unfortunately, legally pursuing potless people on personal guarantees is foolish. Even in cases where you secure judgement on say someones private residence its very hard to ever execute as the bank allways have priority charge.

my sentiments exactly,theres very little anyone can do to you if u havent got anything to get

and theyre only going to waste more of their own time,money and patience chasing someone who has nothing to chase

i would suggest to the op to work with the landlord if possible but honestly if you decided right now to stop paying rent and continue trading there theres very little he can do about it in the short term

he probably knows this already and is just playing hardball but i would call his bluff if he wont agree to negeotiate

murphaph

delllat wrote: »

i would suggest to the op to work with the landlord if possible but honestly if you decided right now to stop paying rent and continue trading there theres very little he can do about it in the short term

Stopping paying rent will be a 'concrete' breach of lease and the landlord will have 'little trouble' getting an order for possession. Little trouble means a year and a bit to get the OP out and a significant loss of income but he'll secure his judgement for the debt at the same time, for what it's worth.

If you can't maintain your business it's not the landlord's fault and at least just walk away and free the unit so the landlord has a chance of his business not folding because of yours. This attitude of "trade on in the landlord's property but stop paying him" is nothing short of theft. I'm not saying that is what you're suggesting dellat (I hope it's not).

Darragh29

murphaph wrote: »

If you were a landlord you'd seek personal guarantees too.

I wouldn't ever be a landlord because I don't believe that property is a commodity as you have suggested. Property is to my mind a natural resource that people should not harvest up like there is going to be a famine. I have one property that I live in, that is the only property that I need to be able to exist on earth so I only have one property. I could if I wanted, buy the property next door, and another one down the road, etc, but I believe in only consuming what I need to get by and leaving what I don't actually need, for other people to use. I'm not tight or stingy, just acquiring assets just for the sake of acquiring them, it just doesn't do anything for me, to me, that is the most pathethic thing any person can do.

I don't want to get dragged off topic here as the thread isn't about my well known views on the forum with regard to property speculators.

OP, my best advice is do not entertain anyone who is looking for a personal guarantee. Look at what has happened in the last few months, I know a guy who had a signage business and he recently had to pull down the shutters. He started around 2 years ago all guns blazing, things were going well for him, then a few months ago, the problems with the economy fed through to his business and his sales just died. He went from running a nice brisk profitable business, to running a business that had no sales, literally over the space of a weekend.

This is exclusively down to what is going on in the economy now, a complete lack of consumer confidence has led to people just not spending money.

Now, if you were in his shoes, would you want to be in a situation whereby you are now personally responsible for the fact that because you signed a ten year lease agreement that you are only a year and a half into, that because the business has failed, through absolutely no fault of your own, that you are now personally resonsible for rent payments on that property that you have decided to vacate on a voluntary basis, (hand back the keys to the landlord), for the next 8.5 years???

Do you think that this guy should be expected to carry the economic woes of this country on his back for the next 10 years??? When it doesn't work out OP, people lose money, this is what happens in business. Unfortunately most landlords know nothing about running a business, they are property speculators who the banks threw money at for the last few years and we all know where that has gotten us now.

justwantajob!

i'm not sure if this is any use, but Jones Lang LaSalle manage Stephens Green. They're not the nicest bunch and so might be inclined to enforce the personal guarantee.

I know it's expenditure but the best thing to do would be get legal advice, spending that money now is better than being dragged through the courts

murphaph

Darragh29 wrote: »

I wouldn't ever be a landlord because I don't believe that property is a commodity as you have suggested. Property is to my mind a natural resource

Land is a natural resource, developed land (commonly caled property) is a commodity Darragh. If everyone behaved as you wish, the world would be comprised of single storey dwellings and small retail outlets (which the owner would live above) and not much else. Who would develop shopping centres? Nobody would have enough land amassed to build a bloody shopping centre on if we followed your self-sufficient model because they wouldn't be allowed to buy it! A retailer doesn't need 150 retail units but he wants to be amongst 150 retailers! Who provides the other 149 if nobody is prepared to 'speculate' on the land and build that development? It's not the idylic solution you desire. Developers are needed in a modern economy and they exist EVERYWHERE (except maybe North Korea).

Darragh29

murphaph wrote: »

Land is a natural resource, developed land (commonly caled property) is a commodity Darragh. If everyone behaved as you wish, the world would be comprised of single storey dwellings and small retail outlets (which the owner would live above) and not much else. Who would develop shopping centres? Nobody would have enough land amassed to build a bloody shopping centre on if we followed your self-sufficient model because they wouldn't be allowed to buy it! A retailer doesn't need 150 retail units but he wants to be amongst 150 retailers! Who provides the other 149 if nobody is prepared to 'speculate' on the land and build that development? It's not the idylic solution you desire. Developers are needed in a modern economy and they exist EVERYWHERE (except maybe North Korea).

If everyone behaved as I believe, we would have an economy with modest, stable and consistent long term growth, where there is a more even balance between what is available and what is sought, and basically a state of equilibrium between market forces by virtue of people behaving in a restrained and broadly considered manner.

If everyone behaved as you propose, we'd be living in a land where the price of property spiralled exponentially, year upon year, because investing in property requires no skill or determination and in a credit rich environment, people with no business skill or ability, will gravite towards easy credit. Easy credit has been the order of the day in this jurisdiction in recent years, hence why we have a whole load of property speculators who are unable to even pay the interest on their principal borrowings now, and the government are bailing out with open ended guarantees and a couple of billion in cash.

You have tried to muddy the conversational waters here by suggesting that I am of the view that people should not be allowed develop land. I stated no such belief. The parasite property speculators that I refer to are the people hoovering up residential and commercial property who think there is a queue of folks like myself waiting to rent those properties!!! Guess what, there is no queue!

Early last year (14 months ago at least), I met three separate 07/08 BMW driving, men in suits who had advertised commercial properties for rent in south Dublin.

They sought the usual "FRI lease, personal guarantee required, bank letter required, blah blah blah"... I visited the three properties associated with each of the three men I met last year, AND I VISITED THE PREMISES AGAIN, TWICE within the last week. Guess what??? They are all empty!!! I rang the agents for all 3 properties, who advised me that they have an interested client who they are "working with" with a view to signing an agreement.

Now forgive me for speculating, but I got out of my car and looked at the locks securing these 3 premises and none of them looked like they had been opened in the last year, with grass growing around the shutters and the whole estate that they are located in, looking like something from the wild west, with tumbleweed blowing down the thoughrefare, and vacant premises left right and centre, not even a security man in sight...

If you think you're going to try to rent a property to me, on the basis of artificially inflated 2007 rents, and on the basis of absolute bullsh*t, then grand, but it will be vacant because I won't do business with you, and neither will anyone else at the moment. It's long due past time for people renting property and those who represent them, to take cognisance of the fact that things have not just changed for now, but have changed for ever.

murphaph

Your arguments are very confused Darragh. You are in favour of property development but against amassing the property to develop. Property won't develop itself-some entity must secure the land to develop and this will often require properties to be 'hoovered up'. Just for the record-one of my properties is leveraged and only modestly. I am not a credit fueled landlord of the Celtic Tiger but you correctly highlight that EASY CREDIT has enabled many people to buy property (I bet a lot of them wish they'd never bothered now) so who provided the easy credit? The landlords?

You suggest that the price of property should not escalate and should reach "equilibrium" (with what?). It isn't escalating now-it's de-escalating! In general however prices of all commodities rise over time. It's called inflation. If you can find a way to keep all costs stable for all time, property will be no different so long as population growth stabilises too.

I probably know exactly why those units are empty with no urgency to let....the landlord probably owns the units outright and has no mortgage on them-we're not all leveraged to the last and desperate to let. There are other reasons (possible developer involvement) for properties sitting idle. If there are no takers, there are no takers.

I have a queue for one of mine though.....location location location is even more important in a recession I am discovering!

Quick question....if your business is in a position to expand and you need a premises but you can't get a mortgage for one, what do you do?

Lplated

MrPillowTalk wrote: »

I wasnt offering legal advice only my own personal experience, I have quite a lot of commercial property, on some of it I have personal guarantees and some of it I don't. The main reason for the guarantee is to make a tenant think twice before renaging on the lease terms. If someone walked on a lease and after conducting searches they had assetts sure I would try and recover the debt, however if they had no personal wealth why would I go about spending extortionate ammounts on legal fees (high court costs circa 15k per day before I get the solicitors bill) to secure a judgement that might at some point in the future become exerciseable, it makes no sense.

People walk on leases all the time, the upshot is the landlord gets stung thats just the nature of the business unfortunately, legally pursuing potless people on personal guarantees is foolish. Even in cases where you secure judgement on say someones private residence its very hard to ever execute as the bank allways have priority charge.

The specific bit that imo is both dangerous and wrong is that in your original post you specifically said "Tbh if the business really is a non runner and you liquidate then it is unlikely the landlord will act on the personal guarantee unless you have large personal wealth as truth be told it is hard to get a court to bring a judgement against someone personally that arises from genuine commercial mishap."

My difficulty is more with the second part of the sentence than the first - it is not hard at all to get a court to bring a judgment (as you put it) - once the rent is owed the court will give judgment.

I appreciate that you, as a landlord may or may not pursue debts, but that is not necessarily the case for other landlords, and besides, with respect, your presentation of the legal position is wholly wrong.

In any event, i'm sure the op is wise enough to get legal advice before doing anything.

murphaph

It's not technically hard to get a judgement for a civil bill Lplated, but once it's over ~€6350.00 it falls under the jurisdiction of the Circuit Court. It's not like going to the small claims court-it costs money and you really need a solicitor and barrister in there. So you'll get your judgement against a potless person alright but it will cost you your not insignifcant legal fees to get that piece of paper that says johnny defaulter legally owes you x monies and possibly owes you the legal fees you owe your legal team. Great. You're now down x monies plus the legal fees, but you have your piece of paper. That's the reality-some large landlords with very deep pockets and/or their own legal teams may opt to get judgements every time, most small landlords or family operations will just lose the money and move on.

MrPillowTalk

Lplated wrote: »

The specific bit that imo is both dangerous and wrong is that in your original post you specifically said "Tbh if the business really is a non runner and you liquidate then it is unlikely the landlord will act on the personal guarantee unless you have large personal wealth as truth be told it is hard to get a court to bring a judgement against someone personally that arises from genuine commercial mishap."

My difficulty is more with the second part of the sentence than the first - it is not hard at all to get a court to bring a judgment (as you put it) - once the rent is owed the court will give judgment.

I appreciate that you, as a landlord may or may not pursue debts, but that is not necessarily the case for other landlords, and besides, with respect, your presentation of the legal position is wholly wrong.

In any event, i'm sure the op is wise enough to get legal advice before doing anything.

Please explain how it is wholly wrong.

With regards to judgements yes they can be achieved however they are only worth anything if the party has assets. Generally landlords wont pursue an avenue that will only end up costing them money.

Lplated

MrPillowTalk wrote: »

Please explain how it is wholly wrong.

No problem, i obviously haven't already:cool: NOTE - the bit i'm saying is 'wholly wrong' is your presentation of the legal position; whether or not a landlord would pursue the matter is a different, situation dependent thing. Anyway ...

In your earlier post on the thread you said - "truth be told it is hard to get a court to bring a judgement against someone personally that arises from genuine commercial mishap".

It is very easy to get a court to give judgment - a lease is a simple contract, of which non-payment of rent is a breach of contract. The creditor/landlord simply issues a writ for summary judgment. The debtor/tenant may, if he has grounds, enter a defence to that motion for summary judgment.

In order to enter a defence, you must obviously have grounds for a defence of which 'genuine [or otherwise] commercial mishap' is not one.

Even where you can come up with a defence, the court may still find that the defence does not meet the claim and give judgment anyway (after a hearing).

1Not sure if that explains it clearly?

Should also say that the legal cost of getting a judgment is much lesser (relatively speaking) than a usual court case - mainly because the Rules of Court provide for this 'summary' procedure, and it is only in a rare number of cases where A) the debtor enters a defence AND the court determines that the defence is 'stateable' (meaning it might have some prospect of defence); that the matter would proceed to hearing at all.

Darragh29

See all this OP??? This is what you could be exposing yourself to if you give a personal guarantee!

DubTony

murphaph wrote:

once it's over ~€6350.00 it falls under the jurisdiction of the Circuit Court. It's not like going to the small claims court-it costs money and you really need a solicitor and barrister in there. So you'll get your judgement against a potless person alright but it will cost you your not insignifcant legal fees to get that piece of paper that says johnny defaulter legally owes you x monies

Lplated wrote:

Should also say that the legal cost of getting a judgment is much lesser (relatively speaking) than a usual court case - mainly because the Rules of Court provide for this 'summary' procedure, and it is only in a rare number of cases where A) the debtor enters a defence AND the court determines that the defence is 'stateable' (meaning it might have some prospect of defence); that the matter would proceed to hearing at all.

So what are we looking at here lads? If a defaulting tenant breaks the lease or stops paying rent, what's it going to cost a landlord if the potless person (I like that) doesn't defend himself in court or for that matter, if he does? Assuming of course that's it above the €6350 murphaph mentioned.

delllat

DubTony wrote: »

So what are we looking at here lads? If a defaulting tenant breaks the lease or stops paying rent, what's it going to cost a landlord if the potless person (I like that) doesn't defend himself in court or for that matter, if he does? Assuming of course that's it above the €6350 murphaph mentioned.

legal proceedings are never enjoyable,theyre costly in every sense of the word-stress worrying about it,time and energy that would be better spent on other things,taking into account how many meetings and phone calls and court dates and solicitors fees,the list drags on and on

not every landlord will want to do all this for a piece of paper saying that some potless pauper owes him money..........that doesnt exist now and may never exist!

So really in this case it may be unfair but often the landlord will take a loss and move on

murphaph

Hi Tony,
I'm down €7k (at last count) so far in legal costs alone against just one single overholding tenant (ie, his lease actually expired end 09/07 and he's still there trading away paying no rent to me nor rates to the council). You can only guess how many thousands in rent that is as well. Meanwhile owing to the nature of the property, I have to have full public liability in place on it as well.

Darragh29

murphaph wrote: »

Hi Tony,
I'm down €7k (at last count) so far in legal costs alone against just one single overholding tenant (ie, his lease actually expired end 09/07 and he's still there trading away paying no rent to me nor rates to the council). You can only guess how many thousands in rent that is as well. Meanwhile owing to the nature of the property, I have to have full public liability in place on it as well.

That's business my friend. In my business, if I find I'm losing money, I can immediately react to that and make whatever changes I might want to, in order to change the strategy. I can decide on a new strategy on Sunday night and that strategy can be put into action the following Monday morning.

In your business, if you sign a 5, 10, 15 or 20 year lease, then the success of your business is wedded to the success of your tenants business for the duration of your lease agreement. This is the business model that you have taken on and I wouldn't like to be in a situation whereby I would find myself losing substantial money, but in order to deal with that issue, I'd have to commit substantially more money in legal fees and I'd have to commit other resources such as my own time and effort into the matter.

I think the smart money in the last few years was going into indiginious innovative small businesses. I didn't fall for the property game because I knew full well that what was going on in this country simply was not sustainable. I don't feel a bit sorry for anyone who has issues now with investment properties. You make your bed and you lie in it.

murphaph

Darragh29 wrote: »

That's business my friend.

I know-I already said it was a business like any other. It has different pitfalls. I wasn't looking for sympathy. Tony asked a straight question about how significant the legal fees can be. I gave him a straight answer.

Darragh29 wrote: »

In my business, if I find I'm losing money, I can immediately react to that and make whatever changes I might want to, in order to change the strategy. I can decide on a new strategy on Sunday night and that strategy can be put into action the following Monday morning.

Good for you. Not sure what it has to do with getting out of a lease though.

Darragh29 wrote: »

In your business, if you sign a 5, 10, 15 or 20 year lease, then the success of your business is wedded to the success of your tenants business for the duration of your lease agreement.

Totally incorrect. It may be linked to the general business environment (like most businesses are!) but not to a specific tenant for the entire duration of the lease. A 25 year leaseholder whose businees runs aground early on will not drag me down for the remaining duration of the lease Daragh. I don't know where you're getting tour 'facts' from but it will take a year or two to get him out with an ejectment order (if he doesn't do the honourable thing and walk if he genuinely can't afford the rent), not 25 years! It will cost me monies to get im out but not for 25 years :rolleyes:

Darragh29 wrote: »

This is the business model that you have taken on and I wouldn't like to be in a situation whereby I would find myself losing substantial money, but in order to deal with that issue, I'd have to commit substantially more money in legal fees and I'd have to commit other resources such as my own time and effort into the matter.

Yes it's clearly a major downside you now seem to suddenly accept that the landlord faces! A while ago you were lambasting landlords for seeking personal guarantees on leases yet now you accept that landlords face significant risks that they have no control over. You want the best of both worlds for your business...the ability to react quickly and to be able to walk away from your landlord who has taken on significant risk in his business. Well, the landlord (having seen many many rogue tenants like mine) will now always seek a personal guarantee, even in recessionary times. Many have been burned by rogue tenants to such a degree they would rather leave premises empty than sign a lease without a personal guarantee.

Darragh29 wrote: »

I think the smart money in the last few years was going into indiginious innovative small businesses. I didn't fall for the property game because I knew full well that what was going on in this country simply was not sustainable. I don't feel a bit sorry for anyone who has issues now with investment properties. You make your bed and you lie in it.

...unless you're a rogue tenant with a limited company and no personal guarantee (what you advocate). I didn't "fall" for the property market. Our family has built up its property over many years of hard work in some very bad times (1980's in particular when my father, lord rest him, bought property against ALL the 'advice' of his accountant and solicitor. It was not seen as a 'sure thing' at all. It was seen as highly risky by 'the professionals' but my father was right and they were wrong). Our commercial property was and continues to be a long term investment that we have no mortgages on and we are continuing to develop it even now because we have confidence that it will be in demand at some point in the future. My father ran a succesful retail business until his death and originally he was a tenant, but he knew he was being a sap handing money over to a landlord when he was able to buy his own and that's where it all started. Recessions are great times to buy property and bad times to sell it.

Our man in Havana

murphaph wrote: »

Hi Tony,
I'm down €7k (at last count) so far in legal costs alone against just one single overholding tenant (ie, his lease actually expired end 09/07 and he's still there trading away paying no rent to me nor rates to the council). You can only guess how many thousands in rent that is as well. Meanwhile owing to the nature of the property, I have to have full public liability in place on it as well.

Can you not get possession?

Can you go in when he is not there and seize the property back?

Darragh29

murphaph wrote: »

Totally incorrect. It may be linked to the general business environment (like most businesses are!) but not to a specific tenant for the entire duration of the lease. A 25 year leaseholder whose businees runs aground early on will not drag me down for the remaining duration of the lease Daragh. I don't know where you're getting tour 'facts' from but it will take a year or two to get him out with an ejectment order (if he doesn't do the honourable thing and walk if he genuinely can't afford the rent), not 25 years! It will cost me monies to get im out but not for 25 years :rolleyes:

If you sign a lease with a tenant, regardless of whether you have a personal guarantee or not, you are tied to that tenant for the term of the lease. If the tenant defaults and you have to go to court to get him/her out, you are in the manure business. I take your point in that you are not necessarily tied to that tenant for 25 years, but between legal fees, loss of rent, and hassle, 1 to 2 years of litigation, you're out of pocket big time and a personal guarantee will not necessarily give you any relief whatsoever! It would take you probably another 5-10 years to claw back those losses from another client, who could end up taking you down the same road!

A tenant could drag a breach of a lease on for years. The point I'm making is that this is only being accepted now by property investors, that all of a sudden, there is a whole other side to their investment that their bank manager conveniently neglected to tell them!

murphaph wrote: »

Yes it's clearly a major downside you now seem to suddenly accept that the landlord faces! A while ago you were lambasting landlords for seeking personal guarantees on leases yet now you accept that landlords face significant risks that they have no control over. You want the best of both worlds for your business...the ability to react quickly and to be able to walk away from your landlord who has taken on significant risk in his business. Well, the landlord (having seen many many rogue tenants like mine) will now always seek a personal guarantee, even in recessionary times. Many have been burned by rogue tenants to such a degree they would rather leave premises empty than sign a lease without a personal guarantee.

They have every control over the significant risks. Don't become a property speculator and you will have no exposure to this significant risk.

It's a downside that would stop me having anything to do with property investment. Leaving a property empty = losing money. Having a personal guarantee from a tenant that is experiencing trading difficulties and has cashflow problems, both business and personal = in the manure business.

Having to pay legal fee's to have said tenant ejected by way of a court order, plus the associated loss of rent = in the manure business.

It might be sufferable in your own unique situation as from your post above, I undestand that you inherited property and you said that the properties involved are no longer mortgaged. If you have to take a hit of 10-20K on a tenant and you have a personal guarantee that isn't worth the paper it is written on by virtue of the financial status of the tenant, then it is going to take you a long time to claw back that 10-20K...

Anyone who bought investment properties, commercial or domestic in the last 5 years is in for a very rude awaking I would think... Again, I think if folks who want to invest, invest in themselves and an innovative idea, as opposed to what their bank manager might think is a "no-brainer" gamble on the property market, then I think we would all be a lot better off. We'd certainly have a more stable trading environment in Ireland now, and we'd have more affordable property, both commercial and domestic.

DubTony

murphaph wrote: »

Hi Tony,
I'm down €7k (at last count) so far in legal costs alone against just one single overholding tenant (ie, his lease actually expired end 09/07 and he's still there trading away paying no rent to me nor rates to the council). You can only guess how many thousands in rent that is as well. Meanwhile owing to the nature of the property, I have to have full public liability in place on it as well.

Ok, this is obviously one of the pitfalls of the property game, but I don't understand. Being someone who would regard himself as a good tenant, how on earth does a guy stay in a property he no longer has any right to be in? Can't you just throw him out? And by that I mean get a few fellahs to hoof the guy onto the street?

By the way, fair play to your old man. My dad was making a fortune in the late 70's and early 80's and didn't invest in anything. Like your father he was told not to touch property, so he let my mother look after it instead. :rolleyes:
At the time, 3 floors over basement Georgian houses were trading for figures in the mid 40 thousands. His repackaging business was making so much money he could have bought and paid for 2 a year and still supported the family.

murphaph

We still don't have an order for possession Bond/Tony, so we can't (legally) go in with a few lads and hoof him out, more's the pity. Even though he is overholding for over a year now, he is still legally a tenant until a judge of the circuit court or higher declares the tenancy to be at an end and any steps to seize the property back (which would be easy in practice) would constitute an illegal eviction and he'd sue and win. He knows all this-his solicitor is advising him to sit tight and take advantage of the law and the slow process. There was a legal complication which I can't disclose here which has allowed this particular case to drag on but it wouldn't be an uncommon occurence. Tony-good tenants are worth their weight in gold and any decent landlord knows it. If only good tenants could be matched to good landlords things would be heavenly. Maybe a website in that (maybetenants.com)! lol.

There are some small developments to level the playing field. The civil law Act 2008 now allows a tenant to waive any rights to a business equity in a commercial property. A business equity in a premises automatically exists once a tenant has been in unchallenged occupation of a premises for just 5 years (used to be three). That's why you used to see 2yr9m leases and now you see 4yr9m leases commonly advertised. It gives the landlord 3 months to serve a valid notice to quit if the tenant overholds at the end of the lease.

The new law allows the tenant to waive any business equity at all so landlords can feel comfortable giving (say) 25 year leases while knowing they won't lose control of their property (effectively) forever. This is positive for both parties as 5 year leases are really useless for a tenant who is investing significant capital in his premises and it was stopping many businesses from starting up at all. Unfortunately landlords are used to the law working against them and are understandably seceptical until this new provision is actually tested in court but I will be using it shortly on a property I wouldn't have given a long lease on previously as I have long term plans for that site but it has such good passing trade that a tenant is extremely keen to get in there for app. 20 years. He knows he'll make good money there in that time and I know I'll still be able to develop there eventually.#

Edit: Daragh you clearly would never invest in property because you see a tonne of difficulties with being a landlord. That's fine and is your choice but if you have cash (credit is pretty unavailable), now is the time to be looking at property. These things go in cycles-Tony is spot on, you coud buy property worth millions (even today!) for tens of thousands in 80's Ireland. Recessions are when smart people make money and accumulate wealth. Owning property is a PITA but I'd rather own it than not and ultimately, property will always escalate in value so long as the population keeps increasing. People who own a decent bit of land will rarely be poor, despite the difficulties.

Innovation is great and should be promoted. We can't export property. However, innovation doesn't put food in your belly. We need run of the mill businesses like food markets and they in turn need property to trade from. Leasing a premises provides flexibility to many businesses who need it. New businesses rarely want to tie significant capital up in property (and that amount will only increase as banks require larger and larger deposits to secure mortgage loans)-they need that cash to get them over the hump and get themselves established. Landlords do actually provide a service to these businesses believe it or not. When your business is established it's all well and good to moan about paying rent to the landlord but that's human nature I suppose.