FRI leases supported by Personal Guarantees- Evil, Evil
“If a business is struggling and the lease is supported by personal guarantees then it is vital to engage and seek advice”.
We hear on a weekly basis, at the moment, of the demise of retailers with a headline involving Debenhams, Homebase or any number of restaurants availing themselves of CVA’s. *
The sole reason for this approach allows these ‘mega-retailers’ to excuse themselves of onerous leases. This is not usually available for ‘mere mortal’ companies with 1-3 branches say.
SME’s cannot usually take this approach because of the insistence of landlords demanding Personal Guarantees to support any lease.
FRI or full repairing and insuring leases are onerous and not fit for purpose in today’s world tenancy agreements. Most commercial tenancies are based on these and are at best inflexible and our statement that “they are not fit for purpose” revolves around the ever changing, fast moving commercial environment we exist in today.
If a business therefore struggles, the biggest personal exposure could be the lease of the business premises, be it retail, industrial, office etc. in nature.
Typically, a landlord will have funded his property by way of traditional institutional funding linked inextricably to the FRI, upward on review 15+ year lease. To this end their hands are tied.
However, if a business is struggling and the lease is supported by a personal guarantee then it is vital to engage and seek advice. As we often say, ‘know the worst and work from there’.
If you face this dilemma talk to us now and call +44 (0) 2895 217 373 for a free consultation. You don’t have to face this issue alone.
*click below to read about Homebase’s rescue plan via a CVA