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Jamie-Law, Solicitor
Category: Law
Satisfied Customers: 6795
Experience:  Solicitor
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I own a building that has a shop rented out on the ground

Customer Question

I own a building that has a shop rented out on the ground floor. the tenant/lessee has of her own volition retired and wound up her limited company but her lease continues in force for another 18 months. During that time she has to pay the monthly rents and other costs such as any applicable business rates (seemingly/perhaps coming into force on disused premises). The lessee wants a lease surrender/relinquishment. I might consider the option, but her offered terms for this are unacceptable. I am now in the process of selling the building (the shop part being offered without vacant possession) and have a good offer in hand. The prospective purchaser may or may not want to agree terms with the commercial lessee/tenant or may want to continue receiving rents as things are now standing, but it occurs to me that (by way of 'arm twisting' or even seeking to break lease clauses as an end means to lease cancellation/relinquishment) the tenant she could hinder things significantly or even prejudice the sale if she were, say, to withhold rents before a sale was concluded. In such case (presently hypothetical and with my enquiries being made on a 'be prepared' basis) I have some 'counter-ideas' but would need some guidance as to what my legally-feasible options might be. Is this the sort of area/situation you could advise/assist with?
Submitted: 11 months ago.
Category: Law
Customer: replied 11 months ago.
One idea I have to avoid losing a sale of the property if the prospective purchaser should be put off by rents no longer being paid as they should be is to come to some sort of 'guarantor' arrangement with the prospective purchaser. In other words, I would make good the unpaid rents for up to 18 months. This would only really be a feasible arrangement if I had the legal right consequently to pursue the shop lessee for financial redress on the basis that I had been effectively 'compelled' to come to such an understanding by her actions and witholding of rents due. One obvious difficulty/obstacle might be though that my lessor status would have transferred with sale of the property and she would be the lessee to a new lessor - so removing the directness of 'contract' if that is the proper term.
Is there though some legal means by which such an arrangement might be set up and by which I could eventually pursue repayment of the costs incurred by me from the tenant?
Another option, should the tenant's withholding of rents due cause the property sale to fall through, and be the demonstrable reason for this happening, would presumably be to attempt to sue her for damages of some sort. Again though, is this feasible and what would be the 'odds' of success (I should add that, although the tenant has put her limited company into liquidation, she has private resources, including a maisonette that she owns).
Customer: replied 11 months ago.
Another possible outcome might be that the property stays on the market offered for sale for some time (without vacant possession of the shop) and, if rents were not being paid, the debt owed to me would accrue. Presumably, trying to sue the tenant for a few months of rental amount would be uneconomical. So, could the owed payments be 'stacked up' over several months to a point where it does become economical to pursue a reimbursement?
Customer: replied 11 months ago.
What would be the legal 'mechanism' for pursuing my costs incurred and could my solicitor's legal fees be added to/recovered if the tenant had refused a voluntary reimbursement?
Expert:  Nicola-mod replied 11 months ago.
I've been working hard to find a Professional to assist you with your question, but sometimes finding the right Professional can take a little longer than expected.
I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.
Thank you!
Customer: replied 11 months ago.
OK. Please could you continue (can it be taken though, that referral to another professional will be encompassed by the fee already paid) and not become an add-on cost?
Thank You
***** *****
Expert:  Nicola-mod replied 11 months ago.
We will continue to look for a Professional to assist you. There are no extra charges.
Thank you for your patience,
Expert:  Jamie-Law replied 11 months ago.

Hello my name is ***** ***** I will help you with this.

What is it you want to achieve please?

Customer: replied 11 months ago.
If the absentee tenant started to be awkward about paying the monthly rents legally due on her empty shop (worst case scenario, she refused to pay), the prospective purchaser might pull out of the property purchase (because they have factored in up to £8000 of rents that would be due to them as new leaseholder up to the end of the lease term (and presuming they were prepared to 'sit things out' because they did not have immediate plans for their own use of the premises until then).
If that happened, the purchaser might pull out, or look to renegotiate a substantially reduced purchase price as a result. So, if withholding of rent did occur (and needed to be declared before purchase) I could end up losing what is otherwise a good purchase offer. I am very reluctant for that to happen, so one option for me might be to in some way act as guarantor for any unpaid rents, possibly up to the end of the lease term in 18 months time. But, if the purchaser was willing to agree to this, and something could be drawn up under which I covered (unpaid) rents until such time as the new owner was no longer entitled legally to collect a monthly rent (e.g.if that person negotiated an early lease surrender to be able to do something with the shop). It would though still presumably be only the new owner (and leaseholder) who had been 'defaulted on' under the lease terms in not being paid rents by the tenant. So, would that mean only the new owner/lessor would have the clear-cut, direct contractual entitlement to pursue the amount owed?. My question is based on two possible options therefore:
1. If having to agree to a reduced purchase price could be directly linked to the commercial tenant's refusal to pay rents due, would I have any entitlement to sue her or take some other form of legal redress (bearing in mind I would not be doing so with any residual legal interest in the property)? (By this means though, I might be agreeing to a large reduction when the new purchaser in fact had intention of negotiating an early lease surrender).
2. If, because the period of having to cover unpaid rents might be shorter than 18 months (best case scenario, the new owner wanted to do something with the shop and so agreed to an early lease surrender) I then offered to stand as guarantor (under a written agreement of some sort) over the unpaid rents, would there be any way of me seeking legal redress against the tenant for the amount I am compelled to pay the new lessor in direct consequence of her actions? (Again, bearing in mind that I would no longer have a direct lessor-lessee contract with her). The alternative would be that the tenant walks away 'unbothered' by the consequences of withholding rents, and that would seem a highly unfair and inequitable outcome if so.
[Perhaps it is too simplistic a view, or even misinformed, but one hears tales of debt amounts being 'purchased' so to speak or transferred to agencies specialising in recovery of owed amounts. If this is a factual or possible arrangement, then some form of linked up arrangement might perhaps be feasible by which amounts paid by me as a guarantor could be recovered in part or whole by me?]
I need to know how I stand as to the feasibility of either option, so that I can be ready with a response if the need arises. Anything you know of, or can suggest, by way of putting a debt or cost recovery plan in place in the explained circumstances would therefore be helpful.
Thank You
Customer: replied 11 months ago.
By the way, where I say 'direct consequences of her actions' above, I do of course mean the tenant's actions, not the lessor's.
Expert:  Jamie-Law replied 11 months ago.

If the tenant is in arrears, why dont you just serve notice?

Customer: replied 11 months ago.
She is not currently in arrears. So far she has yet to default on a payment, although the last one was received as a cheque after many years of being paid by bank standing order. She has been expressing views through her accountant (veiled, but hinting clearly) to the effect that she will not honour the 18 months of rents due on her lease (with a degree of 'faux' naivety it has to be said - I know her well enough to realise that she will have taken professional advice at the outset, so she will appreciate that she has no real legal case to terminate the lease other than by agreement/negotiation). She instead 'expects' to have the rental owed amount substantially reduced in order to be able to 'walk away' from the premises commitment free as it were (nothing of this sort has ever been agreed to by me, or even heard of before this time). She has been told that the six months of rental payment she has mentioned as a proposal would be totally unacceptable (it would for instance leave me
- once a lease surrender was accepted - with all her Council Business Rates due obligations. These are currently and probably her responsibility under the principle of 'beneficial occupancy' it is understood - up until the end of lease term).
She is shrewd enough to realise that it is a sensitive time in terms of a sale of the property proceeding however and that the purchaser has probably factored in (a potential for) 18 months of rent in their (accepted) offer price. For her to stop paying rents on the shop now on any pretext would throw a major 'spanner in the works', and put me at a disadvantage. It would probably require me to at least re-negotiate the sale price, and maybe cause loss of the sale. It is though unfortunately something I can anticipate happening based on the 'warning signs' I have been receiving and so I want to have my plans/options worked out in readiness. Hence my questions as to the my 'standing guarantor' for missed rents payments possibility (especially if that can be in some way linked to be able to being able to recover such costs as I have to incur from the defaulting tenant) and the alternative possibility (if it is one) of being able to sue if instead having to agree to a lower, renegotiated selling price in order to complete the sale.
I hope this assists.
Thank You
Expert:  Jamie-Law replied 11 months ago.

Thanks. But in short what is it you want to achieve?

Customer: replied 11 months ago.
On the basis that the tenant will choose to withhold rent at a critical juncture, which fact would have to be disclosed, and the business purchaser may then threaten to pull out, I want to be able to achieve a position whereby I can reassure the purchaser that, if the sale concludes, he would not lose too much in rent payments that would then be due to him. He could of course, as the new lessor take his own action under the lease for rent arrears - but that prospect might be off-putting to him and not get a satisfactory result. So, if it is possible by some means, I want to achieve a negotiated position whereby in return for a concluded sale, I might guarantee a set number of future rent payments. The problem I anticipate with that arrangement is of course what leverage I would have to get my expenditure back from the defaulting tenant (as she would no longer have a direct lessor-lessee agreement with me.).
I want, ideally, to be able to achieve a position whereby I can legally pursue the total amount that I have been effectively compelled to spend in paying the lessor (as a guarantor in effect) the rent amounts that the tenant should have paid him under the lease but had defaulted on.
Expert:  Jamie-Law replied 11 months ago.

yes you can do that. You can offer a personal guarantee for x amount of payments
This is simply included in a contract.

You guarantee x payments but you still have a right to pursue the tenant for those sums.

So yes, its fine.

Can I clarify anything for you about this today please?

Expert:  Jamie-Law replied 11 months ago.

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