Property Lease Issues – If a business is having issues and the property lease is in a personal name or is supported by personal guarantees – then it is vital to engage and seek advice.
Whilst UK businesses wrestle with the uncertainty of the Furlough and Coronavirus Business Interruption Loan Scheme (CBILS).
The issues of Full Repairing and Insuring (FRI) property leases comes to the forefront for Gym owners across the UK.
Full Repairing and Insuring (FRI) property lease issues.
We hear regularly of issues with Full Repairing and Insuring (FRI) property leases.
They are ‘old fashioned’ in today’s modern business world and usually very onerous.
The main issue prior to Coronavirus / COVID-19, revolved mainly around retailers with a headline involving:
- Homebase, or
- any number of restaurants availing themselves of Company Voluntary Arrangement’s (CVA’s)
* The sole reason for this approach allows these ‘mega-retailers’ to excuse themselves from onerous leases.
Coronavirus / COVID-19 has extended the issues with FRI leases to ALL business including gyms.
SME’s cannot usually take the approach of using Company Voluntary Arrangements (CVA’s), because of the insistence of landlords demanding Personal Guarantees to support any lease.
A Company Voluntary Arrangement (CVA) is.
- An event of insolvency,
- Most leases give the landlord the opportunity of ‘triggering’ any demand on the tenant and/or Personal Guarantee in the event of any form of insolvency.
FRI leases are, as we commented above, onerous and not fit for purpose in today’s world tenancy agreements.
Most commercial tenancies are based on this form of lease.
These are at best inflexible and they are not fit for purpose in today’s ever-changing, fast-moving commercial environment we exist in.
This coupled with the backdrop of Coronavirus creates a ‘perfect storm’ for property leaseholders.
If a business therefore struggles, the biggest personal exposure could be the lease of the business premises, be it:
-office etc. in nature.
Typically, a landlord will have funded their property by way of traditional institutional funding.
This funding links to the Full Repairing and Insuring (FRI) lease, upward on review 10+ year lease.
If a business is experiencing issues and the lease has a personal guarantee then it is vital you seek advice. Know where you stand.
As we always say, know the worst and then achieve the best from there’
If you face this type of issue talk to us now and call 0330 159 5820 for a free consultation.
You don’t have to face this issue alone.