UK Landlord Forum / Life

Hi All,
New on here so please be gentle!
We have a property of mixed retail and residential.
A business tenant wants to sell their business and assign the lease. Any suggestions as to what references I should get and how to ensure that the new tenants are "Fit & Proper people" and able to run the business and most important, pay the rent.
Also it is due for a rent review, any suggestions for online resources for checking retail rent levels in an area.
Thanks for any help.
Bobbity

Rather than leave you with no replies, I have to say I have no knowledge of the commercial side of things.

I would be checking my lease to see whether you can issue a new lease instead to the new tenant, it may be they prefer this. Any premium they may be paying to the existing tenant can still be paid. This is a doable option and one I think I would prefer.

In terms of comparable, you have two options. 1. Instruct a Surveyor RICS thing, who will negotiate for you and have access to the prices places have actually let for, or 2. DIY where you use Google to find things out.

Bobbity
Please be careful of advice received from websites (including my own) and always do your own research.
Obviously I cannot understand your full situation from a small blog....

However I have done something either very similar (or exactly the same).
Is the property perhaps a shop with residential accomodation above it?

If so then you will need to check exactly what the term of your lease says...
It will also depend on how savvy or not or flexible or not is the assignee

Likely you will have no explicit right to provide a new lease (as opposed to agreeing to assign the current one) and may therefore not be able to enforce a new one, but if you suggest that a new lease might be simpler/easier preferable then that might be agreeable to all parties.  That really depends on the current lease and whether you want to make any significant amendments to it....this is likely your best chance to do so.

Commercial Leases usually means the assignor and assignee need to work out the costs between them and so you are free of costs in the transaction (that includes your legal) so you should be able to get a new lease drafted and agreed at no cost.  Assuming the current lessee is paying the rent then of the three parties you are most relaxed and to an extent dictate terms (but suggest you do not be unreasonable).

So point 1 summary: Do you want to have a new lease? Then figure out why and get this on the negotiation table early.

You ask about references this is very tricky (and far more important than a 6 month AST) as there is not an easy section 21 route to get out non-paying tenants (did I write "easy  SECTION 21 route" ??!?!).

Its not fool proof and depends a lot on the property you are talking about...I will assume small high street shop/flat, here are some conditions to approving an assignment:

1. Gas Safety Certificate/ Electrical Safety Certificate (anything else you want maintained before the assignor leaves)
2. Copies of passports (you want to make sure they don't do a runner and leave an empty property)
3. Sight of original passports (maybe a bit anal)
4, Proof of residency (how long have they been there?)
5. Proof of ownershiop of assets ( e.g.  homes/other commercial property)
6. Credit reports (Experian or whatever)
7. Bank references (explicity stating the bank belives the assignee can take on the lease
8. Local business references (maybe not worth much but gives an idea they have a network)
9.Advance payment of 1 quarters rent as deposit.
10.Signed statement from assignee of who will be residing in the flat (important if you have a no-sublet clause)
11. Signed statement as who will be running the business
12. You could ask to arrange to visit the assignee current business.
13. Meeting with assignee to go over the lease in person to ensure they understand (assumes you do) your requirements from the lease (this is important if they are new to the business, helps develop a direct relationship with the assignee and clarifies to you that the assignee really knows what they are doing (avoids the assignor dumping and running)

Rent Review: OMG what a pain in the ar** this process can be.

What does the lease say about rent increases?
What must the increase be based on? Anything? Rents in the area for similar business?

If you do manage to sign a new lease consider:
1. An upwards only rent review (this might be already there anyway)
2. Inflation linking the rent reviews
     2.a. would need to consider definition of inflation and frequency of increase, (compounding of rates to be clear as a new plate glass)
3. Hard coding the rent increases in the agreement, but depending on the contract length this could be a big risk - and it seems to me from your blog you are not aware of the local rates (either the business or the area is unfamiliar to you)

Some folks reading the above will tell you its daft but before I changed the lease my father had a 6-8month sometime longer negotiation spending money on lawyers to get a a new rent agreed...not fun and expensive...
It all depends on the business, the amount of rent and your view on how much value can be extracted at each rent review.

If you dont have a new lease and you need to agree a rent increase:
1. Learn the area do your research (what are other properties going for on the internet) and put forward a number and negotiate from there (do know how to negotiate?)
2. Depending on the rent and property (and the last review) it is highly likely the cost of the RICS surveyor will eat well into the increase in the rent (e.g. rent 13,000 p.a. -> increase rent say £500 p.a. for the next three years until the next review means you get £1500 increase but the RICS guy will take £850+VAT = heartache)

Am a bit puzzled as to how the assignment will go ahead without the rent increase being resolved.

My fingers hurt now...so will stop typing..

Be aware all my advice is likely based on a different skill set to you (experienced landlord who grew up in the area working in the business who now negotaites contracts for an oil company)....but happy to help...

Best of luck

OPW! Boom!

Wot a knob....
Maybe should be charging a fee....
Oh I know I'll become an agent