End of a Commercial Lease

[Hulkster]

A pub in my area has had the lease run out and the Freehold owner has declined to extend the lease and is selling the Freehold/Leasehold combined by EOI. They have also declined an offer from the Leaseholder to purchase the Freehold.

In pub leases you basically purchase everything except the walls and the roof which is where it gets interesting. All fixtures and fittings from toilets, to sinks to floor coverings to bars are the property of the leaseholder.

The leases usually have a clause about leaving the property in same condition as when you entered. If the Freehold owner declines a new lease, and also declines to purchase the plant & equipment, fixtures and fittings from the leaseholder - instead instructing interested parties to negotiate with the outgoing leaseholder it leads to only two options as I see.

1.) A deal is struck between new purchaser and outgoing lessee

2.) The outgoing lessee removes all stock, furniture, flooring, bars, toilets, compressors etc and the purchaser must outfit the hotel from scratch.

Is it a case of buyer beware or will the make good clause over-ride ownership of the chattels?

 

[Dazz]

In pub leases you basically purchase everything except the walls and the roof....

....and the Land.

 

[JoshyBoi]

If you're buying something of that size a) you would have a good lawyer and b) the contract would expressly state what was included...but as always, buyer beware

 

[invest4bigprofi]

....and the Land.

i think that is implied considering we are talking about leasehold

 

[Hulkster]

If you're buying something of that size a) you would have a good lawyer and b) the contract would expressly state what was included...but as always, buyer beware

That's my point - nothing but the walls, roof (and land) will be included.

 

[Dazz]

Sorry 'bout that, I got tripped up on the term used "basically purchase everything except".

When you were discussing multi-million dollar Leasing contracts, weasel words like "basically" and "everything" aren't too flash or appropriate.

Words like "I think" and "implied" also never apply either.

Sorry for the clarification, it wasn't appreciated.

Rest assured, it won't happen again.

 

[jrc]

Don't worry about what was in the old lease. If you're interested you need to look at what is being offered in the EOI documents

 

[Hulkster]

Geez you're a sensitive bunch

I was attempting to "discuss" not negotiate so I felt layman's terms might be permissable.

This isn't a purchase I'm looking at, just an interesting scenario where someone may purchase a commercial property that end's up gutted and unusable without upwards of 500k in fitout costs.

 

[JoshyBoi]

I don't think a standard make good clause would cover the chattels...the basis of such a clause is that the premises is returned to the condition it was in at the start of the lease, that is, containing only what the landlord owns or has provided.

That said, it is in both parties best commercial interests to negotiate a deal as to the existing equipment because a) it would be cheaper for the new owner (unless they wanted to do a complete refurb) and b) it would be a very unlikely scenario that the old owner has another pub with no chattles that they just happen to want to fit out.

As an aside...I'd love to own the freehold to a pub...

 

[lizzie]

Rest assured, it won't happen again.

yeah, right

 

[Dazz]

I thought you'd be in Paris by now lizzie.....not scouting through this nonsense.

 

[Hulkster]

I thought you'd be in Paris by now lizzie.....not scouting through this nonsense.

Let's see if I can get this straight. No-one has fawned over what a genius you are in this thread, so it must be nonsense. Let's set that straight immediately so that this thread can rightfully be nominated for thread of the year.

Your input has been nothing short of a revealtion to me. I can't belive how much you've opened my eyes to how unworthy I really am to have the sunshine from your **** shine upon me.

I shall never dare to use 'weasel words' ever, ever, ever again. xox.

 

[RPI]

The pub leases I have seen all have a clause that the leaseholder may not remove all the fittings etc at the end of the lease but they must be independently valued and the freehold owner must pay the independent valuation. The valuation will be based on the as is / depreciated value and will be 2/3's of f'all, unless the leaseholder was dumb enough to renovate in the last couple of years of the lease (I did see it happen once).

 

[Dazz]

Let's see if I can get this straight.

Failed miserably....go and sit in the corner and twiddle with something other than your thumbs.

 

[lizzie]

I thought you'd be in Paris by now lizzie.....not scouting through this nonsense.

still waiting for that job offer monsieur ...

 

[cu@thetop]

A pub in my area has had the lease run out and the Freehold owner has declined to extend the lease and is selling the Freehold/Leasehold combined by EOI. They have also declined an offer from the Leaseholder to purchase the Freehold.

In pub leases you basically purchase everything except the walls and the roof which is where it gets interesting. All fixtures and fittings from toilets, to sinks to floor coverings to bars are the property of the leaseholder.

The leases usually have a clause about leaving the property in same condition as when you entered. If the Freehold owner declines a new lease, and also declines to purchase the plant & equipment, fixtures and fittings from the leaseholder - instead instructing interested parties to negotiate with the outgoing leaseholder it leads to only two options as I see.

1.) A deal is struck between new purchaser and outgoing lessee

2.) The outgoing lessee removes all stock, furniture, flooring, bars, toilets, compressors etc and the purchaser must outfit the hotel from scratch.

Is it a case of buyer beware or will the make good clause over-ride ownership of the chattels?

There will also be a clause in the lease saying that the landlord keeps anything left behind as abandoned- so outgoing tenant has to rip it out or gift it to the landlord. An incoming tenant doesn't want to deal with the outgoing tenant in these circumstances as the old tenant is not holding the cards- the evil landlord is. Wait for the lease to expire- if the place is gutted well this improves your negotiating power with the landlord. Don't assume in taking up the tenancy that it will be "as inspected" - ask the landlord for their lease and determine whether the bar, postmix units, fridges etc are included. As for chairs, tables etc- these probably belong to outgoing tenant and you can deal with them on that.

 

[chilliblue]

Simple answer.

Before placing a written offer, the purchaser should clearly detail everything that is expected to stay and the condition that it is expected it to be in.

The owner then has a chance to deal with the tenant to come to an arrangement as to what stays.

For most tenants, there are substantial costs in demolitioning a property back to cold shell and any savings that they can make are often taken.

This would happen with any commercial building.

The same goes as when you commence a tenancy.

If you have taken over someone elses fixtures and fittings, your lease should clearly detail what is expected to be made good at the end of the lease.

For my clients, we take photographs and DVD the premises prior to occupancy and those become part of the lease.

 

[Hulkster]

As an update, the tenant has advised that they will not be negotiating with the successful purchaser for stock, plant and equipment.

They will also be cancelling the liqour and food licenses.

This will mean that the purchaser will need to complete a new fit out, apply for a new liquor license, and upgrade the kitchen to 2010 standards for fire suppression etc.

EOI period ends 12/8/2010 with allegedly 2 offers on the table.