QLD Commercial Lease and sale of property

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Vanice BRENTON

Active Member
26 October 2019
6
0
31
qld
Hi there,
Im just seeking some information, please? I have a commercial lease with 8 months to go with an option of 2 yrs.
My intention when I started this business was to build it up to on-sell, which I m currently in the process of doing.(prospective buyer wants a 5 plus 5 plus 5, which would be easy enough to assign to them)
But in the meantime my landlord has sold the property and the new owners of the property will not extend after the 2 yrs option and are not interested in assigning the current lease. So basically I have NO BUSINESS to sell, because really who in the right mind would purchase a business for only a two year period with nothing at the end of it. And I have lost the prospective buyer.
The sale of the property has not settled yet, I am appealing to my current landlord to assign the lease whilst still under his ownership - Is this a possibility?
Even if I wasn't intending to sell where does this leave me and my business at the end of the 2 years option period? With nothing? I really don't see any point in continuing to pour my heart and soul into this business when at the end of the 2 yr option period I am left with nothing. Can you please offer any advice?
 

Rob Legat - SBPL

Lawyer
LawTap Verified
16 February 2017
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Gold Coast, Queensland
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You’ve got two issues here: lease assignment and lease extension.

The easy one to answer is lease extension. Once you’re out of option periods it’s up to the landlord whether they’ll grant you a new lease, or agree to vary the existing one to put in more options. You can’t force them to do so. It sounds like the buyer has plans for the property themselves. Landlords tend to kick out tenants for one of two reasons - they tenant is in breach, or the landlord wants to use the property.

Assignment is a bit different. It’s standard fare to have clauses in the lease to deal with assignment. The landlord should not be able to unreasonably refuse assignment so long as the new tenant can reasonably show they are able to meet the lease obligations, gives sufficient security (e.g. bond, guarantees), and pays the landlord’s costs. So I’d suggest checking the terms of the lease on that front.

For the request to have the landlord assign the lease before the property settles, you’re unlikely to get that agreed to. It’s a standard condition in contracts for commercial property that the buyer gets to examine and okay the existing lease. Assigning it means there is a change in the lease and it could give the buyer a right to terminate the contract. This is especially the case if the lease is registered on title, as unregistered dealings can also give an ability to terminate.
 

Vanice BRENTON

Active Member
26 October 2019
6
0
31
qld
You’ve got two issues here: lease assignment and lease extension.

The easy one to answer is lease extension. Once you’re out of option periods it’s up to the landlord whether they’ll grant you a new lease, or agree to vary the existing one to put in more options. You can’t force them to do so. It sounds like the buyer has plans for the property themselves. Landlords tend to kick out tenants for one of two reasons - they tenant is in breach, or the landlord wants to use the property.

Assignment is a bit different. It’s standard fare to have clauses in the lease to deal with assignment. The landlord should not be able to unreasonably refuse assignment so long as the new tenant can reasonably show they are able to meet the lease obligations, gives sufficient security (e.g. bond, guarantees), and pays the landlord’s costs. So I’d suggest checking the terms of the lease on that front.

For the request to have the landlord assign the lease before the property settles, you’re unlikely to get that agreed to. It’s a standard condition in contracts for commercial property that the buyer gets to examine and okay the existing lease. Assigning it means there is a change in the lease and it could give the buyer a right to terminate the contract. This is especially the case if the lease is registered on title, as unregistered dealings can also give an ability to terminate.
Thank . you for getting back to me. The new landlord are not interested in a leases extension at the end of the option period.
So where doe it leave me? What's the point in carrying on business stil, when in reality at the end of the 2-year option I have no business. I poured all my cash into this business with the hope of selling and then this all happens. Have I lost everything?
 

Rob Legat - SBPL

Lawyer
LawTap Verified
16 February 2017
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Gold Coast, Queensland
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This is an unfortunate issue in renting, but you have no way of making the landlord extend the lease past the end of the current options.
 

Vanice BRENTON

Active Member
26 October 2019
6
0
31
qld
Thank you for your reply. I am wondering now. I have 8 months remaining on my current lease. But I would like to know about terminating this lease ASAP and moving to another premises. Can you please let me know where I stand in this situation? Thank you
 

Rob Legat - SBPL

Lawyer
LawTap Verified
16 February 2017
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Gold Coast, Queensland
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Unless there are any issues which would constitute a breach of the lease by the landlord, then no. You don't have grounds to terminate simply on the basis that the lease may not be renewed following the option period (I say may because there is a chance the landlord may change their mind in the time between now and then, however unlikely that may appear).

You could negotiate with the landlord for a release from the obligations under the lease on the basis of your situation. Whether they will do that is up to them, there's no obligation to do so. However, it may be a distinct possibility that they want to use the premises (as I alluded in a previous post) and that they're simply biding their time until the lease finishes. If that is the case, they may be happy to release you from the lease. I don't think having a discussion with them would hurt your chances of getting out on your terms.
 

Vanice BRENTON

Active Member
26 October 2019
6
0
31
qld
Unless there are any issues which would constitute a breach of the lease by the landlord, then no. You don't have grounds to terminate simply on the basis that the lease may not be renewed following the option period (I say may because there is a chance the landlord may change their mind in the time between now and then, however unlikely that may appear).

You could negotiate with the landlord for a release from the obligations under the lease on the basis of your situation. Whether they will do that is up to them, there's no obligation to do so. However, it may be a distinct possibility that they want to use the premises (as I alluded in a previous post) and that they're simply biding their time until the lease finishes. If that is the case, they may be happy to release you from the lease. I don't think having a discussion with them would hurt your chances of getting out on your terms.

Thank you for the information.
Can you please advise - it is legality to provide a projected profit and loss statement to a company prior to them signing a lease? The company I am dealing with has asked my potential buyer to provide them with a profit and loss statement before they will consider assigning the lease?
 

Rob Legat - SBPL

Lawyer
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16 February 2017
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Gold Coast, Queensland
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I've seen a whole range of requirements before a landlord will consent to an assignment of lease, including requiring a detailed business plan. A projected profit and loss isn't outside the bounds of reason. There's no definitive list so long as it falls within the scope of reasonably necessary to determine the fitness of the proposed tenant - bearing in mind that having an argument about what that entails is both lengthy and costly.
 

Vanice BRENTON

Active Member
26 October 2019
6
0
31
qld
I've seen a whole range of requirements before a landlord will consent to an assignment of lease, including requiring a detailed business plan. A projected profit and loss isn't outside the bounds of reason. There's no definitive list so long as it falls within the scope of reasonably necessary to determine the fitness of the proposed tenant - bearing in mind that having an argument about what that entails is both lengthy and costly.
Thank you - so in actual fact ( in an ethical, compassionate world, not a business-world) they could waver that requirement?
 

Rob Legat - SBPL

Lawyer
LawTap Verified
16 February 2017
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Gold Coast, Queensland
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Can they waive it? Yes they can. Will they waive it? In my experience, unlikely. A landlord has a legitimate right to assure itself that the assignee is capable of meeting the requirements of the lease - and that includes being able to pay the rent.

Let's leave the ethical/compassionate aspect aside - there's an argument there that allowing someone to take over a lease which would ultimately fail and cost them more money in the long run is in itself unethical.