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Thomas, Lawyer
Category: UK Property Law
Satisfied Customers: 7609
Experience:  BA (Hons), PgDip, Practising Solicitor
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I have a public house on a tied lease that has consistently

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I have a public house on a tied lease that has consistently lost money over the last 3 1/2 years. I am pretty much up to my neck in debt mainly caused by high rent, expensive stock prices bought through my tied lease agreement and high borrowing and banking charges. I borrowed £64,000 against my jointly owned property which is worth about £180,000 with a £50,000 mortgage outstanding. I have now basically ran out of cash flow due to a downturn in trade caused through a competitor undercutting me my trade has dropped 20% over the last 6 months. I have just put the pub on the market. If I do not get the time to sell the property what are the implications and my alternatives. Can I legally get my landlord to give me time to assign the lease? Can I avoid bankruptcy? I do not have many creditors.

Whe do you anticipate that you will breach your lease please?

Customer: replied 3 years ago.
Possibly as soon as next week, I have asked my area manager (Enterprise Inns) to submit a request to reduce rent and increase discount by way of deed of variation but don't think they will. It means that if I cannot pay my trade account next week my payment terms will be cancelled and my lease breached.

Thank you for your question and patience, I’m Tom and I’ll try to help you.

Your commercial lease will contain a clause called a “forfeiture” or “re-entry” clause. This is the clause which gives the landlord the right to terminate the lease and get possession of the property.

You need to check this clause in your lease. It will likely say that where any of the rent or other sums payable under the lease remain unpaid for 14 days then the landlord is entitled to peaceably re-enter the property and take possession of the lease. At this point the lease would be forfeited (ie. terminated).

It would also likely give them the right to forfeit if there is a material breach of any of the tenant’s covenants of the lease.

It is therefore up to the landlord’s discretion whether or not to take possession.

This means that your only option is to remain in close contact with the landlord about what is happening. If you breach the lease or are likely to next week then I would advise letting the landlord know but at the same time giving them evidence of you putting the property on the market.

If you are able to show that it is probable that you will shortly find a buyer then they will hopefully take the view that this is the better way to proceed. I would keep quiet about the equity in your house though.

The landlord will almost certainly not allow you to assign the lease whilst there is money outstanding so you would have to make payment of the monies outstanding either a term of the assignment and payable by the assignee OR find a way to pay the money.

If the worst happens and the landlord takes possession then you would probably only be able to apply for relief from forfeiture (ie. to stop the forfeiture once it has happened and re-instate the lease) if you are either able to show that you can pay the outstanding sums OR that there is a n assignee ready, willing and waiting to take possession of the property.

If they take possession of the property then they will be left with a breach of contract claim against you. If there is sufficient money (£750 or more) outstanding at the date they forfeit then they can petition you for bankruptcy I’m afraid.

Your bankruptcy would be restricted to the assets that you own. So, if you and your wife have share in your property (ie. 50:50) then they would only be able to claim against your share. Your wife’s share will be protected provided that she is not party to the lease or other contracts. Your wife should be able to postpone the sale of the house (if this is what is proposed) until certainly for the first 12 months and possibly after that as well if it is the family home.

Generally though, the best policy is to keep your landlord aware whilst aggressively attempting to find a buyer to assign the lease to.

My goal is to provide you with a good service. If you feel you have received anything less, please reply back as I am happy to address follow-up issues specifically relating to your question.

Kindly rate my answer if you are satisfied with the information I have provided.

Kind regards,

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