[Question] Business Tenant and rental contracts

[wernersenekal78]

Hi There, I'm new to this site and was wondering if someone can give me advice. We are a small business with 4 shops around the country. But business has been bad and with all my wages and rent been growing negatively over the last 9 month with about 25k a month and the backups are finished. I have 2, 2year contracts in malls that has still 1year to go, but at this rate it would be better to close my shops. Is there some way that I can get out of this contract with the new consumer act, or is there anyway that one can cancel a lease should you not be able to make payment any more. These are big companies and their contracts are tight, can anyone help?

Thanks
Werner

[Dave A]

Ouch! My sympathy.

These are big companies and their contracts are tight, can anyone help?

That tends to be the problem.

I'd look at alternatives - selling the shops, trying to negotiate a better rate with the landlords due to hard times...

[sterne.law@gmail.com]

The bad news is it is highly unlikely you will have an easy way out.
In terms of CPA, yours leases were prior to the Act. Had they been post act, as much as you still have the right to cancel, the landlord still has the right to claim reasonable damages. (Remember, if you conclude the lease as a business entity then this falls away anyway)
As to the way forward - you could cancel the leases and face the normal breach penalties. Your lease may have such clauses. The norm would be damages, which is not neccessary calculated according to remainder of lease term, but would be pretty close. The innocent party does need to mitigate their damages, that is they do need to attempt to let the building.
Fighting with landlords is not easy, they hold all the cards and generally litigation is far too costly. (The CPA will hopefully come to the rescue in terms of negotiating leases with regards to unfair terms (especuially escalation clauses)) HOWEVER, you may be able to negotiate a reduced rent. Yes, this can and does happen.
Mathematically if you are losing more than the rent, then the payment of rental damages is sometimes the better option. Emotionally very difficult but it happens to the best of us.
A sale would be the best but not easy if the figures are not there.

[Justloadit]

Check your current lease, many of the lease agreements in shopping malls have a clause based on number of feet entering the mall. If they have this clause, you are fully entittled to request a reduction on rent due to the number of shoppers dropping. The reason for the high rent is due to the number of consumers entering the mall. One crappy part about this may be that there is a Checkers or Pick n Pay in the mall, and most shoppers simply go staright to the respective store and walk out. It is another angle if it is there.

[AndyD]

A sale would be the best but not easy if the figures are not there.

If by chance he found a buyer would the landlord generally have any power to veto the sale of the business? Would the lease usually be transferred into the new business name or would a brand new lease agreement need to be negotiated by the new company? (I'm assuming shopping centers don't allow their tenants to sub-lease their premises)

[sterne.law@gmail.com]

If by chance he found a buyer would the landlord generally have any power to veto the sale of the business? Would the lease usually be transferred into the new business name or would a brand new lease agreement need to be negotiated by the new company? (I'm assuming shopping centers don't allow their tenants to sub-lease their premises)

The standard clause is "subject to landlord approval, such which should not be unreasonably withheld". Generally a new lease will be done. It tends to be cleaner and simplier in terms of guarantees, liability and such. Landlords use standard leases, so the terms will be the same. They tend to be fairly flexible on the time period in that you are not "forced" to take a 5 plus 5, for example