Jones Granville has extensive experience in helping clients to deal with the challenge of legacy leasehold property. One of its clients had a lease on a vacant, run-down 1980s office building in Warrington. The building was in poor repair and there were considerable dilapidation responsibilities for the company client. The subsidiary had relocated, leaving head office with the problem of disposing of the lease which had four years to run.
There was an outstanding rent review and the landlord was pushing for a 35% rent increase.
Part of the building was sub-let on a lease and due to expire in one year’s time. The building was a liability in every sense – so the brief to Jones Granville was simple. Get rid of the lease liability at minimum cost to the client.
Gareth Jones, Director, says; “Working with our local agent, we quickly realised the building was virtually unmarketable due to its condition and the relatively short lease remaining.
“The sub-letting income offset some of the costs but that only had a year to run and it was damaging our ability to deal with the building as a whole.”
The Jones Granville strategy was to:
The landlord was inflexible on the surrender as the current lessee was a Plc and it didn’t want to give up the good covenant our client offered.
Gareth says: “However, we continued to negotiate the rent until the matter was heading to arbitration. Under the threat of Arbitration we then agreed with the landlord that we would purchase the building and negotiated the best deal we could to achieve this.
“At the same time we worked with the local agents to identify a prospective purchaser. The prospective purchaser would not pay the price the landlord wanted but we negotiated the best price we could for a disposal. We then entered into a back-to-back transaction and the difference was topped up by the client. Contracts were exchanged back to back with a simultaneous completion.”
The client was delighted. The company was freed of the obligation to pay rent and other outgoings for the remaining three years of the lease. It was happy to be rid of the ongoing liability and the shortfall on the purchase price was only around 25% of the dilapidations responsibility that would have arisen at the end of the lease.
Gareth, Jones Granville, says: “In addition, the client avoided the rent review altogether. It was very happy with the deal as we demonstrated an open minded approach and an effective execution of the strategy to produce a successful result. It was a win-win solution all round.”