Transfer of Lease?

[willister]

Hi,

I have a tenant who is in financial difficulty/verge of folding up his business, he has approx 6 months left of his first term (we signed a 4x5) with an option for 5 years to renew. He wants to transfer his lease to his business partner who wants to buy him out/continue operations.

I am reluctant/not willing to do this. I am happy to transfer the balance of the 6 months left on the contract to his business partner just to give me enough time to advertise to lease it out and happy to do month by month after that if I don't get a party to rent in time.

I am not comfortable to transfer his business partner and allow him to execute the 5 year option as we don't know him enough and therefore can't trust. The tenant is now 20 days in arrears and has therefore breached our clause in the retail act, which allows me to terminate the existing contract.

I really don't think their business model is viable in an environment like this and frankly I have seen the bloke trying to chop and change various times during his 4 year tenure that I frankly would feel relieved getting rid of him now and perhaps also put him out of his financial misery!

Is this possible?

Thanks.

 

[Terry_w]

Is refusing to permit the assignment of lease possible?

Probably. Read your lease and see what you say about it.

 

[Aaron_C]

If your lease is a standard form one then usually as the landlord you can't 'unreasonably refuse assignment of a lease'. You may have grounds to refuse it though if you think the new assignee is inexperienced, hasn't paid the rent etc.

 

[chilliblue]

You can have your existing tenant remain as guarantor for the length of his existing lease (including the option) whilst the new business partner is the tenant.

You will quickly know if he thinks the partner is viable and have a back up should things go sour.

PM your email address and I will send you an Asset and Liability form.

 

[willister]

If your lease is a standard form one then usually as the landlord you can't 'unreasonably refuse assignment of a lease'. You may have grounds to refuse it though if you think the new assignee is inexperienced, hasn't paid the rent etc.

It's actually a standard retail lease, under this he cannot transfer it without my approval.

The bigger question I guess is the 5 year option which is coming up in Jan 14. What I am trying to avoid I suppose is really them both exercising this option (if they can). In all honestly, they've had a 4 year trial and it really hasn't worked, by signing on is just a waste of my time and theirs....I can predict they will fall behind the rent as soon as 6 months into the new lease.

They will then just demand rent to be reduce etc and just cause me headaches.

Is this a possible solution? Terminate current lease with current tenant, sign his business partner up on a month by month lease until I find a new tenant?

Thanks.

 

[chilliblue]

Your best solution is to ensure that you follow the terms of the lease and terminate the agreement when you can in the correct fashion. You may want to seek independent legal advise to confirm your options and have a clear understanding on how the take up of option works and the timings involved.

Ensure that the existing tenant is aware of his legal responsibilities under the terms of the lease and advise them that you will be diligent on ensuring that all terms are adhered to. I.e. rent, rental increases, when due, etc.

If the lease has no obligation to the partner taking on the lease then why would you continue the headache?

When you have correctly terminated the agreement, start looking for a new tenant.

Another suggestion is to talk to a few commercial agents and see what the demand for your type of property is and the terms that those tenants are currently signing.

 

[willister]

Your best solution is to ensure that you follow the terms of the lease and terminate the agreement when you can in the correct fashion. You may want to seek independent legal advise to confirm your options and have a clear understanding on how the take up of option works and the timings involved.

Ensure that the existing tenant is aware of his legal responsibilities under the terms of the lease and advise them that you will be diligent on ensuring that all terms are adhered to. I.e. rent, rental increases, when due, etc.

If the lease has no obligation to the partner taking on the lease then why would you continue the headache?

When you have correctly terminated the agreement, start looking for a new tenant.

Another suggestion is to talk to a few commercial agents and see what the demand for your type of property is and the terms that those tenants are currently signing.

Thanks for the suggestion.

I am currently seeking legal advice so this does not become messy!

Ideally yeah I want to cut this guy off cleanly but really would like that income flowing with his partner whilst looking for a tenant!

The headaches of commercial!!!

 

[Scott No Mates]

Many things come into play:
1 how much written notice is required to exercise the option, has that date passed?
2 conditions on exercising the option ie must have rent paid up to date

3 conditions for assignment of lease
4 payment of costs for assignment
5 security for the current lease term
6 security for next lease term

If the current tenant validly exercises the option then you have little choice but to honour the lease. If they then choose to assign you may only object on the grounds provided in the lease. What is unreasonable is a matter for debate.