Commercial Property

Commercial Property

Commercial Lease l Should I enter into a personal guarantee under a Jersey lease? | – Q&As

Guarantee | Parslows International

Commercial Lease l Should I enter into a personal guarantee under a Jersey lease?

As a Company Director am I obliged to give a personal guarantee?

It has become accepted practice in Jersey for Lessors to seek a personal guarantee from corporate tenants when entering into a commercial lease. While there is no lawful requirement for personal guarantees to be provided, the reality is that the provision of a lease without a personal guarantee is unlikely to be agreed.

Will I be released from my personal guarantee if I assign the lease to a new lessee?

Unless the Jersey lease specifically provides, there is no obligation on a lessor to release a guarantor.  When negotiating the terms of a lease, particularly a long lease, it is important to consider this (amongst other issues) and make sure you agree with the lessor to include a clause to release the personal guarantor on assignment.

Will I remain liable under a personal guarantee if the lease term is extended?

In general terms you cannot be bound by or liable under a Jersey lease unless you have executed it. If the term of the lease is extended and you as a guarantor had not agreed to do, then its liability may not extend to the renewed term of the lease.  However this is a general statement and you should always take legal advice on this point are there are exceptions to this general statement.

Can the Lessor choose whom to take action or does the Lessor have to action all the parties under the lease?

The Lessor under a standard Jersey guarantee will be entitled to choose whom to action.  It will come of no great surprise that the Lessor is likely to assess whom, out of the lessor and or guarantor, has the stronger asset position and take action accordingly.  Moreover if the Lessor actions, for example the guarantor, and finds there is a shortfall, the Lessor will thereafter be entitled to pursue the Lessee for the balance.

Comment

Great caution should always be taken when providing a personal guarantee under a lease (or otherwise).  If is not a document you should sign without legal advice.

If you require any further information, advice or assistance please contact our head of Commercial Property Carl Parslow at carl.parslow@parslowsinternational.com

 

Commercial Property


Main Contact | Carl Parslow

Head | Commercial Property 


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows International accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct. 
Commercial Property

Trials and Tribulations of Exercising a Break Clause in a Commercial Lease

Break Clause Parslows International Trials and Tribulations of Exercising a Break Clause in a Commercial Lease

It is not uncommon for a commercial lease to contain a break clause in favour of the lessee. However such a break clause will often be drafted conditional upon certain events.  The most common being that the lessee will have paid the rents reserved, observed and performed the lessee’s covenants and provided vacant possession.

Lessee’s should always be wary and not underestimate the strict nature of a break clause.  Courts will strictly construe a break clause and any conditions attached to it.

An example of the break clause being considered was the English case of Avocet Industrial Estates LLP –v- Merol and another (2011).  There are numerous other examples. Here the English High Court found that the lessee owed interest of around £130 due to occasional late payment of rental.  The court found the lessee to be in default of the terms of the lease and therefore the lessee’s break notice was invalid. The level of interest involved was relatively small, the lessor had not issued a demand for the interest and the Lessor had not utilised a rent deposit that it was also holding by way of security for non-payment of rent.

Whilst there is a Code for Leasing Business Premises in England and Wales 2007 which includes recommendations as to preconditions as to a break clause, these are not compulsory. In Jersey there is no such code.  The contractual terms will determine the relationship.  It is therefore important to consider taking appropriate legal advice.

Considerations

  • If a break clause is to be included in the lease take legal advice to ensure that the terms are fully understood and reasonable
  • If you decide to exercise the break clause you must pay close attention to all the requirements of the clause, including the formal requirements, and follow them precisely.
  • If you are considering exercising a break clause take early advice before you give notice to ensure you haven’t missed anything.

Otherwise you may find the break clause is not valid and that you are contractually obliged to the lease for the remainder of the term.

If you require any further information, advice or assistance please contact our head of Commercial Property Carl Parslow at carl.parslow@parslowsinternational.com

Commercial Property

 


Main Contact: Carl Parslow

Head | Commercial Property 


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct. 

 

Commercial Property

Commercial Leases in Jersey – A brief guide

Commercial Leases in Jersey Parslows InternationalCommercial Leases in Jersey – a brief guide

While the terminology may seem quite familiar for real estate practitioners in other jurisdictions the legal effects in relation to Commercial leases in Jersey can be very different and assumption should not be made.

Term of lease

Commercial leases in Jersey for a term in excess of nine years must be passed before the Royal Court of Jersey on a Friday afternoon.

A commercial lease with a term of nine years or less may be dealt with without of the formality of attending the Royal Court.  These can be completed on any day by the parties executing the lease document itself.

Security of tenure

Jersey has no equivalent to the Landlord and Tenant Act 1954 relating to a prima facie right to remain in commercial premises after the expiry of a lease. A landlord holding Jersey property should however note that, under Jersey law, if a tenant remains in occupation after expiry of the term and rent continues to be accepted rent, a new tenancy may be deemed to arise on identical terms, save as to guarantors.

Assignment

Unless the lease expressly provides otherwise, a tenant may not assign a lease without the consent of the Landlord. Jersey has no equivalent protection such as the English Section 19 of the Landlord and Tenant Act 1927, which implies that a landlord must act reasonably.

Breach or termination

Jersey has no concept of forfeiture of leases.  There is no equivalent of the Law of Property Act 1925 section 146 procedures. The Landlord is likely to have the right to cancel the lease on specified grounds if the Tenant is in breach, subject to obtaining an appropriate court order. There is no provision for “relief” from cancellation. If both parties wish to terminate the lease, they can enter into a contract of cancellation on agreed terms.

Tax

Goods and Services Tax (‘GST’) may be payable on Commercial Leases.  This is currently 5% on rental. There are exceptions to this. International Service Entities such as Banks, trust companies and other financial institutions who have been granted such an exemption will not incur GST.

Non-resident landlords are taxed at a rate of 20% on rental income derived from Jersey property.

Stamp duty on leases is payable if the term of the lease exceeds nine years.

There is no capital gains tax in Jersey.

If you require any further information, advice or assistance please contact our head of Commercial Property Carl Parslow at carl.parslow@parslowsinternational.com

 

Commercial Property

Main Contact | Carl Parslow

Head | Commercial Property 


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows International accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct. 
Commercial Property

Jersey Commercial Property – Goods and Service Tax (GST)

commercial lease rental GSTCommercial lease rental GST – Overview

The Goods and Services (Jersey) Law 2007 specifies that commercial lease rental payable under leases of commercial premises attracts commercial lease rental GST charge.  This is presently 5%.

Landlords are liable for GST on taxable turnover of over £300.00 per annum (at present) in relation to commercial lease rental.   In such cases the Landlord will be obliged to pay GST on the rent received.

The only exception is where the Tenant is an International Services Entity (ISE). In such cases GST remains zero-rated on the rent. A non-ISE taxable Landlord should ask for a copy of the Tenant’s ISE certificate to ensure that it is not required to pay GST to and is not an (ISE))

Whose liability?

In all commercial leases the Landlord should include a clause which allows the Landlord to recover any commercial lease rental GST payable on the rent (and other payments) from the Tenant. If such a provision is not included, then the Landlord has no right to recover the GST from the Tenant.

Even if the Tenant is an ISE, the landlord would be advised to include a recoverability provision as on assignment a new tenant may not be an ISE.  A non-ISE tenant (if GST registered itself) should be able to offset any GST it pays on the rent against the GST it is charging for its goods or services.

If you require any further information, advice or assistance please contact our head of Commercial Property Carl Parslow at carl.parslow@parslowsinternational.com

Commercial Property

Main Contact | Carl Parslow

Head | Commercial Property 


Please note that the information provided on this website is for general information purposes only and is designed to provide you with an outline of the legal services we offer.  Whilst we endeavour to ensure our information is correct and useful, we make no representations or warranties regarding the accuracy or completeness of the information offered.  Information on our website does not constitute legal advice and Parslows International accepts no liability for any loss or damage arising out of, or in connection with, the information found in this website.  Please consult a lawyer in the event that you require professional assurance that our information, and your interpretation of the same, is correct.