Preston solicitor warns traders risk lease transfer nightmare
Tuesday 28th April 2009
A leading Preston Property Lawyer is warning of the dangers of tenants subletting properties in an attempt to reduce rental costs, as an increasing number of businesses look to scale back their operations. As more properties become empty on the high street, so some are changing hands as tenants move out and transfer their lease to another trader.
Stephen Hodgson, a Partner and Head of Property at law firm Marsden Rawsthorn explains "In leases granted since 1996 the "industry standard" has been for an authorised guarantee to be included in the lease terms. This means that if the tenant transferred the lease they would guarantee to the landlord that the person taking over the lease would pay the rent. So if a tenant transfers a 5 year lease to another party, they effectively relinquish control over their liability. If the new tenant then ceases trading after two years, the original tenant is liable for three year's rent. In the present market tenants who are assigning their lease on, say, a business sale, restructure or a retirement need to look very hard at the finances of the assignee to ensure that they don't find trouble coming back to find them from a property they thought they had heard the last of."
Hodgson concludes that in difficult times the best approach is dialogue. "Landlords don't like empty properties and the last thing tenants need is legal action. Both parties are better off agreeing a sensible lease from the outset and, if problems arise during the course of the lease, coming to an arrangement that allows both to salvage something."
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