SA No Existing Lease Agreement - What are Our Rights?

[Nat Rob]

We took over the licence on a hotel because we renovated it at our own expense with some of it paid by the guy who was leasing it by the owner.

He was in a commercial lease for 12 months then purchased it at the end of the lease. He got us in to fix it up and then asked us if we wanted to run it. We didn't pay any money for the lease we just got applied for and received the licence for the hotel.

After a month or two, the guy that leases it promised to help us financially as we had no money to start up the pub. We now owe thousands of dollars to creditors. This guy started hounding us for rent after a month of opening the doors.

We asked him repeatedly for a lease agreement but he still hasn't done anything about it. We have been open for 4 months. He started off by saying to us that he owned the hotel and that the rent will be $2,500 but he will give us 3 months free rent.

Then he changed it after a month and started saying that we have to pay him rent because we 'cost him $10,000 a month'. He said we only have to pay 20% of the takings for the week every week up to $2,500. In the last month, he has been constantly hounding my husband (he won't talk to me about it) demanding rent from us, changed it to $3,000 a week, belittles my husband constantly, and has now threatened to evict us because we haven't been keeping up with the rent. We have also learnt that he hasn't paid any rent to the owner of the property that he was in the contract with.

The owner wants us to stay here and wants to lease it to us and not sell to the other guy, but it has to be settled by the courts. If the guy comes up with the rent he owes then he can still purchase the hotel, if not then the owner gets to keep it. He will evict us if he gets it. He has led us down the garden path and now we owe money and do not want to leave this pub that we love.

What are our rights under commercial law?

 

[WiserNow]

If the guy, leasee, is not paying the rent to the landlord he is in breach of the conditions of the lease and the landlord can issue a breach notice to vacate. He will however still owe all the money owing under the contract. This is a matter between the landlord and the leasee and has nothing to do with you.

Does the leasee have the permission to sublet the property? If not the leasee is breaching the lease by subletting to you. Under his lease with the landlord if he cannot sublet to you then he cannot give you a lease agreement and you have no legal right to be there.

You mentioned you appled for and got a licence...I assume this is the liquor licence?

The landlord will not be in a position to enter into a lease with you until the current leasee is officially issued notice to vacate the premises for breach of his contract (ie not paying the rent) and left. Depending on the conditions of the lease the landlord should be giving the leasee with a 7 or 14 days period to fix the breach. If it is all fixed the leasee can remain and buy the property. This is the legal agreement the landlord entered into. Once again nothing to do with you but a matter for the landlord and the leasee.

Moving forward have a business meeting with the landlord and discuss the lease in place with the current leasee and what steps the landlord is taking, because as much as you love the pub, you are putting yourself at considerable risk. After the meeting confirm your understanding of the meeting in an email and the plan moving forward for you and the landlord.

If there is a condition in the lease for the current leasee to sublet then you must get this agreement signed. I would suspect the landlord would have to give his approval.

Stop paying this guy money until you have all the facts and written signed agreement in place.

Again if you have no legal right to be in the property you have to leave (also cancel the liquor licence) even if the landlord says it is ok because his lease and legal agreement is with the current leasee. Whether you are in the pub or not the matter will be resolved by the current leasee fixing the breach and buying the pub OR being evicted and the landlord can enter into an agreement with you.

You will obviously want your money back. Do you have any written agreements with the guy? Hopefully you have electronic funds transfer at least. Start putting it in writing in a professional manner regarding the money owed and the solution you are proposing, avoid any emotional points just stick to clear facts and i would put the facts in paragraphs starting with dates. if the guy won't give you the money back it is a civil matter you need to take to court. Don't forget to include money you have earnt.

I wish you luck. i understand it is emotional and upsetting but this is a business transaction and you want to reduce the risk you are at.

 

[DennisD]

Hi there

It sounds like a dream of a pub and a nightmare of a situation

You're carrying a lot of risk without a formal lease agreement especially as this bloke seems to have the option to purchase the pub (including renovations made at your expense) and you've discovered he can't be taken at face value

I agree with Ash's suggestion to discuss options with the owner, though as the owner is in a commercial lease agreement with this bloke it may not be so simple or even possible for the owner to switch to you guys.

Please keep us posted with how it goes.

 

[Nat Rob]

Thank you both for your replies. We have since found out that the guy has now taken over the freehold of the building. He is offering us the lease hold but at a stupid price that we cannot afford. He is money hungry and I do not want to deal with him anymore. Plus, because of him we have gone into at least $50,000 debt. We have now decided to leave the hotel and hand it over to him, but not before we take back everything that we put into it that he never paid for. We have to cut our losses unfortunately, but we have learnt a lot from it.

 

[WiserNow]

You mentioned taking back everything you put in that was never paid for... Maybe some here on the forum with more experience can provide information on retention of title and any issues Nat Rob needs to be mindful of...

 

[Ian Macleod]

Remember any money you pay in rent may be seen as a verbal agreement to lease even though there is no paperwork.