Commerial lease extension "option" can new owner cancel it?

[drfunk]

Hi guys

TLDR - if a lease has been made by an old owner, 2+2, can the new owner refuse the option to extend, or does the leasee have the right to 4 years if they wanted it?

I'm looking at purchasing a commercial building currently occupied by a government department in Victoria

you would normally think this is a good thing, but I if I bought I want to use the building for my own business

They are currently on a 2 + 2 lease, let's say the initial lease ends Jan 2015. The agent selling the property is trying to tell me that I can just kick them out Jan 2015. I have no experience with commercial leases but from my reading online it seems this is incorrect, that if they wanted to renew until Jan 2017 I wouldn't have a choice... so which is correct?

I haven't spoken to the govt dept about this yet, but I seriously doubt they would want to move

 

[cu@thetop]

See your lawyer. Don't rely on the agent (ask him/her to put that in writing).
If not in default the tenant can usually force the option. May be some argument if the lease is not registered (at least here in Qld) but I wouldn't rely upon it.

 

[pinkboy]

Hi guys

TLDR - if a lease has been made by an old owner, 2+2, can the new owner refuse the option to extend, or does the leasee have the right to 4 years if they wanted it?

I'm looking at purchasing a commercial building currently occupied by a government department in Victoria

you would normally think this is a good thing, but I if I bought I want to use the building for my own business

They are currently on a 2 + 2 lease, let's say the initial lease ends Jan 2015. The agent selling the property is trying to tell me that I can just kick them out Jan 2015. I have no experience with commercial leases but from my reading online it seems this is incorrect, that if they wanted to renew until Jan 2017 I wouldn't have a choice... so which is correct?

I haven't spoken to the govt dept about this yet, but I seriously doubt they would want to move

Without sounding like a record - what does the lease say?

You have that right?

pinkboy.

 

[HotRod]

Hi guys

TLDR - if a lease has been made by an old owner, 2+2, can the new owner refuse the option to extend, or does the leasee have the right to 4 years if they wanted it?

I'm looking at purchasing a commercial building currently occupied by a government department in Victoria

you would normally think this is a good thing, but I if I bought I want to use the building for my own business

They are currently on a 2 + 2 lease, let's say the initial lease ends Jan 2015. The agent selling the property is trying to tell me that I can just kick them out Jan 2015. I have no experience with commercial leases but from my reading online it seems this is incorrect, that if they wanted to renew until Jan 2017 I wouldn't have a choice... so which is correct?

I haven't spoken to the govt dept about this yet, but I seriously doubt they would want to move

Red the lease and see a lawyer.

It it's a govvie dept I'd be very surprised you could just kick them out.

I would think the lessee has the right to extend or not and not the other way round.

 

[Scott No Mates]

The option is there for the benefit of the tenant, the basis for rejection of the option by the lessor is breach of lease or possibly demolition. Once the option is exercised, then barring a breach of lease, the only area of disagreement could be the new rent which can be determined by a valuer.

If the property has a government tenant, then you are paying a higher price for the quality of the tenant, why would you be kicking them out if you have paid a premium for the building?

 

[Dazz]

if I bought I want to use the building for my own business

If that's what you want the building for, I would highly suggest you look for another building.

The Lease - by definition - and by the very nature of the Option, gives the Tenant the right, but not the obligation, to take up the extra term.....hence the word Option.

The Lease - by definition - has been granted by the Landlord for the full term including all Option terms if the Tenant so desires (as long as they do not default).

That is, by way of example, a Lease of 5+5+5 means ;

1. The Landlord has only 5 years of security...which the Bank would recognise. The other 10 years are all up in the air and cannot be relied upon for continued rent.....the Landlord typically finds out either 3 or 6 months prior to the end of the Term whether the Tenant wishes to extend or not.

2. The Tenant has 15 years of tenure if they so wish.


In your case, the Vendor gave the building away for 4 years. Whether the Tenant takes up their 2 year Option period in jan 2015 is totally up to them. The Vendor (current Landlord) and you as Buyer (potential future Landlord) have no say in it whatsoever.


The Agent is telling you porky pies.....probably because they have figured out you have no idea whether they are or not.

 

[DaveM]

Certain rights and obligations are conferred to the new owner on sale... typically lease terms and options pass from lessor to lessor.