long term business lease too costly

LegacyUser

mods, please move this to accommodation property or business management also

quick question, if mr x has a shop in an area where there are a lot of vacant premises and mr x is paying 40k per annum for 500sq ft premise based on a long term (15+ years) lease, but there is a 1000sq ft premise right across the street going for market value of 28k, what options does Mr. X have? The landlord won't budge even though the price is far above current market value and due to lack of people in town, business is tough. The cost of rent is now a huge factor and Mr. X could get a shop twice the size for nearly half the price he currently pays. Independent research has been done to show Mr. X is currently paying almost double market value but is tied to this due to long term lease. Mr. X is asking for a reduction but landlord won't budge. Mr. X may not be able to keep up payment due to downturn in business and if this happens, the landlord will of course have to adjust his rent to market value. Mr. X and landlord don't get along. Mr X would like to keep premises but at a lower price and believes this will be of greater benefit to himself and the landlord in the long term. Afterall, if they agree to say 25k per annum, Mr. X can keep his business going and the landlord will get more than market value and consistent rent.

This is to remain confidential so no details can be given but would appreciate any terms of law that may help Mr. X get a better deal or save his business by moving elsewhere.

cheers

dudara

I'm going to move this to Business Management - but the downside is that anonymous posting is not allowed in that forum

dudara

Sleepy

Is there an option to break the lease built into the contract? Assume there'll be some penalty but might be worth exercising?

If not, best option would appear to be to fold the company and re-establish across the road in the larger, cheaper premises with a better thought out lease agreement.

newman10

Is MrX a Sole Trader or a Ltd Company.

Has MrX given personal guarantees for the Lease

DubTony

newman10 wrote: »

Is MrX a Sole Trader or a Ltd Company.

Has MrX given personal guarantees for the Lease

Chances are he has. The cost of getting out of leases without a break clause can be horrific. I had to leave 85k worth of equipment that I still owed for. So if moving my business had been an option, (it wasn't) there'd have been no real benefit unless there was a massive increase in turnover.

OP, a lease is a lease. And if it was drawn up before 2008, I doubt your Mr. X has much option but to either stick it out, or pay the price. It effectively cost me 18 months rent to get out. I had no break clause, and the landlord reneged on a deal ("Have you got that in writing"), so I was screwed.

The game has changed somewhat, and some landlords have recognised this (although many have their heads firmly stuck deep in the sand). But a guy with a lease isn't going to get out of it cheaply as the prospect of getting a new tenant paying the same rent is as good as non-existent.