Landlords and tenants – get your lease in writing!

Pierre had just purchased a café business and was keen to move in and start implementing his ideas. Jocelyn was the landlord of the building in which the business was operating, and because of her love of adventure travel, was often hard to pin down.

Unfortunately for Pierre, this meant that the previous business owner had never managed to get a written lease in place with Jocelyn. Pierre knew this was important, but felt that it would not be worth holding up the purchase just to wait for the lease. So he decided to settle the business purchase and deal with drawing up a lease with Jocelyn later (despite his purchase agreement requiring this to be in place on settlement). As it proved difficult to nail Jocelyn down, the days dragged into weeks and the weeks to months with no lease having been signed.

One day Pierre was shocked to receive a letter from Jocelyn’s lawyer informing him that she was terminating the lease in 20 working days’ time. Apparently, Jocelyn was selling the building, and as the new owner would be turning the building into apartments he had no interest in continuing Pierre’s lease. Pierre had already spent a substantial amount of money fitting out the premises and generating customer goodwill, and realised he stood to lose a lot from this unexpected turn of events.

It is surprisingly common for landlords and tenants to neglect to put their leases in writing, or to fail to enter into a new written lease when the existing one expires. What makes it so surprising is that for business people your lease may be your biggest outgoing and your most important legal agreement.

Landlords and tenants may not realise that the law provides that these unwritten leases can usually be terminated by either party with 20 working days’ notice. This is a very tenuous basis to operate your business on!

You should always take legal advice before signing a commercial lease.