Organise your own sale instead of lease surrender, says Morgan & Clarke

By Gurjit Degun

- Last updated on GMT

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Lease agreement: Morgan & Clarke says lessees looking to surrender their lease should organise a sale on the open market
Lease agreement: Morgan & Clarke says lessees looking to surrender their lease should organise a sale on the open market
Lessees looking to surrender their lease have been advised to enter into a new 15-year agreement with their pub company, and then immediately organise a sale on the open market.

That is the advice from licensing surveyors firm Morgan & Clarke, which explained that this should only be done on the specific understanding that there is no bar on assignment for the first two years of the new lease.

David Morgan explained that the firm is seeing a lot of people deciding to surrender their lease, and a general agreement has been reached with the pub company that says there will be no fine or penalty charge for a “structured departure over three clear months”.

He said that when a surrender is completed, the asset in monetary terms comprises three items: the value of stock and consumables as at the day of change; the in-situ worth of the inventory being independently valued; and the return of the security deposit and balance on the trading account (if any).

“This particular surrender, however, is triggered by not wishing to take up a new lease as the rent offer — although lower than the passing rent — is not looked upon as being particularly exciting,” said Morgan.

Having been advised by a pub property agent, Morgan said that, after agency fees, there would “probably be a further £30,000 to £40,000 that could be derived through the sales exercise”.

“So, rather than walking away on the surrender of the current lease, there is financial sense in entering into the new 15-year lease and immediately organising its sale in the open market, on the specific understanding that there is no bar on assignment for the first two years of the new lease,” Morgan explained.

“This bar on assignment was in all of the new leases that were originally granted. It was specifically inserted to ensure that there was no automatic instant windfall profit in the grant of an assignable lease as against what used to exist previously, which was non-assignable, short-term tenancies.”

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