Wanting to buy a commerical unit..but tenants

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yeap

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Hi all,

I am wondering has anyone had any experience with commercial tenants?

I have come across a property for sale that is perfect for what we need (location, cost and space), its not for us to rent out but to occupy.

But after inquiring we have found it is going to auction and that there are tenants who are not paying rent and if we purchased then its up to us to get rid of them.

According to the estate agent they have been there since end 2006 with reviews every 5 years and 21 year lease...but again not paying rent now (Squatters rights?).

Should i just avoid at all cost or if we purchase with the intention of moving in would that make it easier to get rid of them?

Thanks!
 
yeap said:
Hi all,

I am wondering has anyone had any experience with commercial tenants?

I have come across a property for sale that is perfect for what we need (location, cost and space), its not for us to rent out but to occupy.

But after inquiring we have found it is going to auction and that there are tenants who are not paying rent and if we purchased then its up to us to get rid of them.

According to the estate agent they have been there since end 2006 with reviews every 5 years and 21 year lease...but again not paying rent now (Squatters rights?).

Should i just avoid at all cost or if we purchase with the intention of moving in would that make it easier to get rid of them?

Thanks!
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i bought a commercial property eighteen months ago with tenants in situ but they are paying thankfully

i do know its easier to evict a commercial tenant than a residential one , a close family member is a solicitor and has been involved in such dealings , that this tenant is " squatting " - overholding will put off most people and this presents an opportunity for buying at a discount , your biggest question is have you the stomach for a relatively drawn out eviction with these people , i doubt any bank would lend you a bean to buy a commercial property with tenants like this and getting a mortgage for a commercial property below 5% is a hard task ( even sarenco thinks 5% is usury level )

as far as i know you need to be using a property for twelve years to attain squatters rights so they may very well not have squatters rights , best consult a well informed solicitor on this one and bear in mind the solicitor will tell you to not proceed as the vast majority of solicitors are terrified of anything which isnt pure vanilla , the previous owner is obviously bankrupt and the receiver probably never bothered to evict the tenant ( most likely NAMA ) , anyway the tenant is clearly in breach of his lease conditions

if the place can be bought at the right price , it sounds achievable provided you have a solicitor who is willing to take on a mess , its a cash buy by the sounds of things however
 
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You'll get great general advice here, and @galway_blow_in has experience in this area.

However, you really need a copy of the lease agreement with the tenants, and legal advice specific to the lease / circumstances.

You've given no indication of the value of property / rent.

There is generally a covenant in the lease for non payment of rent, which makes it very easy to terminate the lease.

However, the tenant might be chancing their arm - if the sale is a bank repossession, they might know it doesn't impact the landlord whether they pay or not. If they start paying rent once you buy, how will you evict them? Again, there might be clauses in the lease, but without a breach of lease covenants it is extremely difficult to evict a tenant before the expiry of a lease.
 
RedOnion said:
You'll get great general advice here, and @galway_blow_in has experience in this area.

However, you really need a copy of the lease agreement with the tenants, and legal advice specific to the lease / circumstances.

You've given no indication of the value of property / rent.

There is generally a covenant in the lease for non payment of rent, which makes it very easy to terminate the lease.

However, the tenant might be chancing their arm - if the sale is a bank repossession, they might know it doesn't impact the landlord whether they pay or not. If they start paying rent once you buy, how will you evict them? Again, there might be clauses in the lease, but without a breach of lease covenants it is extremely difficult to evict a tenant before the expiry of a lease.
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excellent point red onion , if the lease only commenced in 2006 , it has a long way to go , was just wondering if the fact they were not paying and thus in breach of lease conditions , would this render their lease null and void in sofar as seeing out the term ?

the OP would need to consult a solicitor with proper experience here , some solicitors specialise more in these matters than others , might be better look to a firm which has a partner or associate who deals specifically in commercial property
 
galway_blow_in said:
excellent point red onion , if the lease only commenced in 2006 , it has a long way to go , was just wondering if the fact they were not paying and thus in breach of lease conditions , would this render their lease null and void in sofar as seeing out the term ?
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It all depends.

The existing landlord could possibly evict them on that basis. However, depending on the sale agreement and conditions for transferring lease, they would likely only owe the new landlord rent going forward. What happened previously might be irrelevant (and difficult to prove in any event) so they'd need to build up new rent arrears before they breached the covenant and could be evicted.

Generally there are other covenants that are quicker to prove depending on the rigour of the original lease agreement (e.g. not having building insurance in place).

The value of rent arrears determines which Court has jurisdiction, so if it's a large property you can quickly run up massive legal bills if it goes to court.
 
Thanks all!

The advice really has helped and at least now I know what to ask the estate agent when I go back to them in terms of more details on the current lease / covenant in the lease / current breaches or even who its coming from (ie. Nama).

The building is 150k with rent of 20k a year (ex vat and services). While we could stretch and use all our funds to buy it outright, it would not be ideal and a short term mortgage would be better and still cheaper than renting long term (but as has been said we must have the tenants gone before a bank will even consider that).

I will consult with a solicitor who deals with these cases but the advice given here has already been invaluable, thank you both very much!
 
When you're asking about the lease, make sure to ask if VAT is chargeable on it. Just another thing to watch out for!
 
Thanks Red!

I am trying to get in touch with a solicitor to get a proper eye on it but from having a look at the legal documents, as its going for auction now and they are all online. It seems as those the tenants letting are actually the mortgage holders..well former as it went into receivership in July of this year if i am reading it correctly. So they may be hard pressed to leave and may make things more awkward, again this is to my untrained eye so i will let the professionals check it out but thanks for the advice as its given me a direction to go in and know what to ask.
 
yeap said:
Thanks Red!

I am trying to get in touch with a solicitor to get a proper eye on it but from having a look at the legal documents, as its going for auction now and they are all online. It seems as those the tenants letting are actually the mortgage holders..well former as it went into receivership in July of this year if i am reading it correctly. So they may be hard pressed to leave and may make things more awkward, again this is to my untrained eye so i will let the professionals check it out but thanks for the advice as its given me a direction to go in and know what to ask.
Click to expand...

is this being sold with allsop ?
 
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