An increasing number of commercial landlords and tenants are looking to restructure their businesses, particularly where working from home and online shopping create new and different considerations.
Some of the familiar questions posed when considering a company restructuring are:
- “I am restructuring and need to assign my lease to the new legal entity – how can I do this?”
- “Can I exercise a break clause in my lease now?”
- “How can I approach my landlord to surrender my commercial lease?”
- “Can I negotiate a lease renewal on more affordable and flexible terms, to reflect current market conditions?”
- “What liabilities may I face in this course of action?”
If commercial tenants approach their landlord without a proper understanding of their rights, obligations and liabilities, it could result in a costly mistake for a commercial tenant impacting any proposed restructure for the rest of their business.
Equally, landlords will be considering what is recoverable under the terms of any lease, particularly if a tenant is looking to restructure, and ensuring they receive adequate security from any proposed new tenant without a trading history.
An underlying this is the age-old question: Who will pay for this?
Other factors the parties to any negotiation will be considering are:
- What happens with any dilapidations if I am assigning mid-term / surrendering?
- What are the formalities surrounding the break clause, and have these been complied with?
- If a new lease is being granted to a new tenant – whether any guarantor will be required?
- Will there be any formal documentation required to effect any surrender, variation or assignment?
- Can someone negotiate the new lease for me in case I miss something vital?
- If the tenant is in administration / liquidation, is the rent still payable?
Given that a commercial property can be one of the largest repeat financial obligations a business can have, not approaching any restructuring with it in mind could be fatal to that process – particularly if any new entity wants to retain the same premises.
Bishop & Sewell have a team of expert commercial property solicitors, providing advice to many different sectors and therefore able not just to supply a service on the law, but toward your business interests too.