Problem with shared commercial lease, advice needed.

Discussion in 'Growing and Managing a Business' started by Nickerz, Sep 27, 2010.

  1. Nickerz

    Nickerz
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    So here's the shortest I can make this without boring you guys. About 3 years ago I ran into an old coworker and provided them some web services. They were running an ecommerce business successfully. They were kind enough to show me the ropes and I rented a small space in their warehouse for very cheap and started getting myself going. About a year later we had grown close enough that we looked at another warehouse together, and leased it for 18 months. The lease expired in April\May. We renewed for another 3 years.
    They ended up getting a couple rather large loans and packed the warehouse with new goods. Good for them, I was happy for them. However, they have now deviated from our agreed terms in the warehouse. I pay a third of the total costs on the warehouse, and they are using more than a third of the space. Originally we had some small walk ways, and an area from the overhead door that was to be "community space" in which no one could store goods. The purpose being since there are two companies in this warehouse when goods come in we shouldn't have to ask someone to move their goods.
    For the past 2 months they have been not only using the community area as mostly permanent storage (it has their goods in it 80-90% of the time) but they put a rack up and are using permanent storage above the community area. They claim they are "not using the community area since its just air." I have called this imperial space, since they claimed it when I obviously have a third right to any space above that.
    Previous to the racks they asked if using space above the ground was OK. I said it was fine "as long as a third of it is mine." Currently I don't have a problem with the air space, since I don't have enough goods to fill that rack, though soon it will be an issue. However, using the community space for storage is an issue. Recently the tipping point came last week. I had a small personal fridge (the kind you have in a dorm room) that had some rotting food in it. We washed it out and I put it in the community storage area and they keep returning it to my area. I told their workers to stop putting it in my area since we're doing inventory. This tells me it is their feeling they now not only own the air space in the warehouse, but also the community floor space.
    I can no longer in good conscious accept the fact that they think its ok to behave like this. I have brought it up several times already. They are my friends, and this isn't about money, its about respect. I would never act this way to one of my friends, because I believe in fairness. And fairness, is 1/3 of the warehouse, regardless of your business need for more space. I said I was open to them purchasing unused space from me proportionately.
    My second question involves lease terms. While I don't have the lease terms handy for posting, is it generally acceptable for 2/3 of the lease signers to leave and then sublet their portion of the lease? They have talked about leaving to get a bigger warehouse and then leasing their portion out. I'm not comfortable with a complete stranger leasing their area. To me, it would be like someone moving out of an apartment and then leasing it to their friend. I'm not aware that this is OK in standard leasing agreements, and that is my question. In a typical lease, may any of the lease persons leave and reassign the lease to someone else?
    I'm basically looking on how to handle this. I like these guys but I consider their behavior abnormally rude. I've been flexible with them, however they like to rule with a hypocritical iron fist. At this point I'm considering finding a way to terminate the lease, or find a legal remedy to regain my 3rd share of the warehouse. However, if I regain my share I'm confident they will lease out there portion, hence my second question.
    Thanks in advance.
     
  2. Fergal

    Fergal
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    Welcome to our business forum Nickerz and thanks for asking your business questions. Sorry to hear that you have run into these issues and I'm sure it is not a comfortable situation to be in.

    If I was in your shoes I would arrange a semi-formal meeting with the other parties, to review the management of the property and how everything is working out. This should give both parties a good opportunity to get all concerns and issues out in the open. Perhaps there is something you are doing that is inconveniencing them in a way you are not aware of. Having a meeting to go through these issues should help to clear the air and come up with solutions that will be to the benefit of everyone.

    The answer to that question really does depend on the specific terms of your lease. Some leases strictly prohibit sub-letting, others allow it with the expressed written permission of the landlord and others are more flexible again. Have a read of the lease again and see if there are terms relating to sub-letting. It would also be a good idea to speak to a professional legal adviser, as leases can be very complex from a legal perspective. If you had a lawyer help you with the original lease, a quick phone call to this person might help clear up a lot of issues.

    Perhaps there is an amicable win win solution that could work for both parties. The other party obviously needs a bigger premises and perhaps it is time for you to move on and find a self-contained premises for your business. If you are not comfortable with the other party sub-letting their portion of the premises, maybe they would like to take over your portion of the lease and thus allow you to find a new premises that would be more suited to your requirements.

    Please post back with your thoughts and good luck with it!
     

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