What you need to know about renting out business premises
Buying a commercial property to rent out can be lucrative, but you naturally want to know first what the options and areas of concern are. There are a number of issues involved that you will want clarity on before buying. We answer some important questions in this blog.
Investing in real estate has proven to be a good investment in recent years. However, buying a commercial property does require careful consideration. Not all businesses are thriving, and it also remains to be seen what the effect of the corona crisis will be. Especially companies in certain sectors are already feeling the effects of the crisis. Other companies are not affected or, on the contrary, are turning higher sales because they meet a certain need. What are other areas of concern?
Is it possible for a landlord to terminate the lease early?
An agreement is drawn up stating until when the tenant is obliged to pay the rent and until when the tenant is entitled to use the premises. Neither the tenant nor the landlord can unilaterally terminate the contract in the interim. If you break the lease with the tenant, the tenant is entitled to compensation for breach of contract. The amount of compensation may have been stipulated in the contract, otherwise you will have to come to an arrangement with the tenant. In extreme cases, the court will rule on it.
Is the landlord obliged to agree to a 'substitution'?
A 'substitution' means that the tenant comes up with a replacement tenant. Another entrepreneur will thus serve out the lease. The landlord must cooperate with this (with exceptions), but it is different if there are well-founded reasons not to agree. For example, the new tenant is not creditworthy.
As a landlord, are you liable for the temporary inability to use the premises due to calamities?
For example, due to a fire in the premises, the tenant is temporarily unable to use the business premises or only part of it. The landlord takes care of insuring the premises against fire and certain other risks, but the tenant cannot recover consequential damages from the landlord. The loss of turnover due to temporary inability to fully use the premises cannot be recovered from the landlord of the premises.
What if the tenant goes bankrupt?
In that case, the lease continues as usual. According to the Bankruptcy Act, both the landlord and the receiver can terminate the lease. However, a notice period of up to three months applies. In consultation, a shorter notice period is possible. The overdue rent is considered a claim against the bankrupt company. It is therefore questionable whether you as a landlord will still be paid the overdue amount.
Do you have questions about financing the purchase of business premises for rent? We can provide answers to the questions you may have.
