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Ash
Ash, Solicitor
Category: Law
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Experience:  Solicitor with 5+ years experience
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My limited company is signed in to a commercial lease

Resolved Question:

My limited company is signed in to a commercial lease for a five year term with a break clause at year 3 and a 6 month notification period.
A deposit of £3k has been lodged.
I am looking to terminate the lease and am interested to know of the repercussions should I be unable to continue to pay the quarterly rental.
How liable are the directors of the limited company for this lease?
Submitted: 1 year ago.
Category: Law
Expert:  Ash replied 1 year ago.
Hello my name is ***** ***** I will help you with this.
Has anyone signed a personal guarantee please?
Customer: replied 1 year ago.

No.

Expert:  Ash replied 1 year ago.
If you are unable to pay then technically the Landlord can take possession. They may or may not need a Court order depending on what is in your lease.
But unless a personal guarantee has been signed then the Directors will not be personally liable
Can I clarify anything for you about this today please?
Alex
Customer: replied 1 year ago.

That landlord has been notified that we are struggling to pay, yet opted to hold us to to term.

Lease provides for deductions from deposit to cover missing rental and that deposit be topped up. Failure to do so will result in a breach. If a breach is relied upon then it appears that this is the ultimate result required by me.

If we are unable to pay the rent and there is no personal guarantee, then it appears the landlord could take possession immediately, if I understand correctly.

Would the landlord be likely to chase for the remainder of the term?

Expert:  Ash replied 1 year ago.
If the Company has no assets then there would be no point. It would be throwing good money after bad. But the Landlord would be entitled to chase payments up to the next break clause
Alex
Customer: replied 1 year ago.

So, despite no personal guarantee, the landlord could still opt to chase up to the next break clause, but they would be chasing an zero asset and zero capital limited company, which ultimately would bear no fruit.

We have offered to source a replacement tenant. There is nothing in the contract which states they are required to accept a replacement or that the replacement must be of a certain standard.

The limited company is looking to be struck off, are we obliged to notify landlord if provision is made for the same in the contract and if so, would this be considered more of a breach than the inability to afford the rental?

Expert:  Ash replied 1 year ago.
Re first point - yes
Second point - as you say the landlord is under no obligation but must minimise any loss
Third point - you are meant to notify the landlord yes.
Alex
Customer: replied 1 year ago.

Thank you.

I have just seen a guarantee and indemnity section at the back of the contract which makes reference to guarantor, yet the signature on the contract is as a director of the limited company only.

Does this mean that by including this at the back of the contract, the director is signing as a personal guarantor? It's not clear at all that this is the case.

Expert:  Ash replied 1 year ago.
No I don't think so. It needs to be a document which is clear and allows you to take independent legal advice
Alex
Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience: Solicitor with 5+ years experience
Ash and other Law Specialists are ready to help you
Expert:  Ash replied 1 year ago.
Hi

I am just following up on this. Is there anything else I can help with? If so, please let me know.

Alex.

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