Business going under - need help

[vrockie]

Thought I would put everything down here and hope some of you who have experienced these issues before might be able to help me (believe me, I am desperate)

 

My wife currently runs a retail franchise business as a sole trader which is in destress, she intends to cease trading later this month with 4 years still to go on the franchise agreement and 2 years on the propery lease.

 

Current business debt

 

Franchisor - £6000 approx (we may be able to offset this with return of stock)

RBS - overdraft at £8600

LTSB - £1000 (currently in payment plan of £75 per month)

 

Liabilities

Shop lease 2 years @ £12000 per year

Franchisor - Future loss of commission (10% of gross takings) and breach of contract

Business Rates for 2 years

 

Wife does not particualy want to go bankrupt if she can help it as she is joint owner in our family home which has only about £20,000 equity in it and new car which was bought through the goverment scrappage deal and is on HP, we also have a joint bank account with an overdraft debt of £2500

 

I am unable to continue supporting the business as it has already put me into an extra £45k of debt ato cope and will probably need to seek debt advise once we have sorted out the business.

 

 

Questions

Is she liable for the full business rates for the 2 years

 

If she goes down the bankrupcy route would our joint personal bank account be frozen leaving me with the £2500 to pay which I would not be able to afford.

 

Would the OR have an interest in her car (only 4 payments made)

 

What possessions would be of interest to the OR in the home (furniture, jewellery etc. etc.)

 

Are there any options to avoid bankrupcy given the debt and liabilities.

 

All answers will be greatly appreciated.

[Crapstone]

Hi,

 

Have you spoken to the Franchisor yet to see if they can offer any help or leniency?

 

She shouldn't be liable for the 2 years rates but you would have to look at the contract in detail. Does the franchisor own the premises or is it privately or council owned?

 

Alternatives to bankruptcy | Business Link

 

Business Debtline

 

A couple of links to get you started.

 

It does sound as though the car will have to be returned but that depends on what percentage of it she owns, what fees would be outstanding and the term left. I'm saying that from a general affordability point of view and not what an OR would say.

 

Have a chat with one of the above or the CAB as is seems that your problems extend far more than what could be easily answered here.

[palomino]

Rates : she may be liable depending on your local authority. As occupiers of the property you are of course liable, however our local authority chargs only half if there is no business being carried out there.

 

The lease : speak to your landlord. He will be pretty annoyed I guess but at least you've been honest. It gives him an opportunity to re-let the premises with a minimal loss of income.

 

I would also discuss your situation with a solicitor. Business matters can become very difficult very quickly. It also helps to have correspondence sent by a solicitor.

[vrockie]

Thanks Capstone and Paolomino,

 

We have asked the Franchise earlier this year - they are not interested, they were thrown out of the British Franchise Ass. earlier this year and nearly all the other franchises are in a simuliar situation.

 

We sent a letter to the landlord 2 weeks ago stating our finacial problems and asked for them to reply within 7-10 days with any suggestions they might have - no relpy recieved.

 

The car on HP - do you think the finance company would accept payment from myself?

[vrockie]

I have just had a reply from our council regarding the business rates

 

"Under current legislation if a property is empty and the rateable value is less than £15,000 there are no rates payable. Therefore if your wife vacates the property there will be no rates liability for the duration of her lease."

 

which is great news.

[Crapstone]

I have just had a reply from our council regarding the business rates

 

"Under current legislation if a property is empty and the rateable value is less than £15,000 there are no rates payable. Therefore if your wife vacates the property there will be no rates liability for the duration of her lease."

 

which is great news.

 

So that's one good thing sorted.

 

From what you describe you will need some help in dealing with the Franchisor as it's not straightforward and there could be a glimmer of light. If you contact the people I listed they should point you in the right direction.

[WelshMam2009]

Personally, I think your wife would be far better off declaring herself bankrupt and, regardless of what you finally decide, I would be setting up individual bank accounts in your own names.

 

As regards the lease, I would advise some caution. I am sure that there is some peculiarity in property law which means that the original lessee remains liable until the expiration of the contract.

 

Hence, even if the lease were assigned to a new lessee, if they defaulted on payments, I believe that the landlord is still legally entitled to pursue your wife for the rent. Please take advice on this.

[palomino]

 

As regards the lease, I would advise some caution. I am sure that there is some peculiarity in property law which means that the original lessee remains liable until the expiration of the contract.

 

Hence, even if the lease were assigned to a new lessee, if they defaulted on payments, I believe that the landlord is still legally entitled to pursue your wife for the rent. Please take advice on this.

 

I think this needs clarifying. My wife's lease (originally for 25 years) has had several lessees over the years since it was first taken out. Are you saying that the previous lessee could be liable for my wife's rent if she defaulted? I find this a bit odd.

[nunnyrose]

Having run my own small business this is how I understand it:-

The original lessee is the name on the current lease. When a lease is assigned it remains the responsibilty of the original lessee as it it not a new lease. So, if you sign a completely new lease it's in your name, if you then assign the lease you are still legally responsible for rent and rates, meaning you can be pursued, but in turn you can pursue whoever you assigned the lease to...... hope that makes sense.

[WelshMam2009]

Having run my own small business this is how I understand it:-

The original lessee is the name on the current lease. When a lease is assigned it remains the responsibilty of the original lessee as it it not a new lease. So, if you sign a completely new lease it's in your name, if you then assign the lease you are still legally responsible for rent and rates, meaning you can be pursued, but in turn you can pursue whoever you assigned the lease to...... hope that makes sense.

 

Well explained and yes, this is my understanding also nunnyrose

[vrockie]

Well, we have now closed the business and have received the following letter from the franchise's accountant who is acting as a DCA and they are threathening bailiff action, please could someone advise what the next move is.

 

I have just replied stating that the account is in dispute as they have added an extortionate £3000 to the bill for manuals, signage and the till which I have also agreed to return at their convienence, and I have mentioned that the case is being looked into by my MP and also for a breakdown of the debt.

 

What I need to know is will they continue to send bailiffs in at an early stage or are they legally obliged to carry on with correspondance before any action.

 

I would hate to have bailiffs turn up especially when my kids are home and for them to see sombody taking away their xmas presents.

 

Thanks for all your help in advance

 

I have attached the letter from Watson Hope Accountants/DCA

[vrockie]

May also need a bit of advise on attaching the letter so will type it out

 

Watson Hope & Co

Accountants

Po Box 2960

London

NW3 7HX

 

Tel: 0208 84588864

 

[email protected]

Ref: xxxxxxxx

 

 

Dear Sir or Madam

 

Re: OVERDUE ACCOUNT xxxxxxxxxxxx £9000

 

 

We are debt collectors acting for xxxxxxxx xxx in relation to the above. The debt has not been paid despite reminders and we are now instructed to collect it from you forthwith.

 

If you have reason why not to pay your debt please will you advise us immediately. Otherwise would you please now make out your cheque for £9000 and send it to this address by return.

 

you may want to take legal advice because failing reply our instructions are to claim against you with a view to instructing bailliffs. Note, this will be without further reference to you whether as to costs or otherwise.

 

Alternatively if you are in financial difficulties you must contact this office with your proposals also by return.

 

Yours faithfully

 

Watkins Hope

Edited January 17, 2010 by vrockie

[palomino]

Having run my own small business this is how I understand it:-

The original lessee is the name on the current lease. When a lease is assigned it remains the responsibilty of the original lessee as it it not a new lease. So, if you sign a completely new lease it's in your name, if you then assign the lease you are still legally responsible for rent and rates, meaning you can be pursued, but in turn you can pursue whoever you assigned the lease to...... hope that makes sense.

 

I'm afraid it doesn't. When a commercial lease is assigned the effect is that the assignee replaces the assignor as the leaseholder. The assignee assumes the benefits and liabilities of the assignor from the date of assignment.

 

The situation you are talking about is a sub-lease - an altogether different situation.

[toddle2u]

I'm afraid it doesn't. When a commercial lease is assigned the effect is that the assignee replaces the assignor as the leaseholder. The assignee assumes the benefits and liabilities of the assignor from the date of assignment.

 

It really depends on the terms of the assignment as the original leaseholder can be responsible if it is a term of the assignment is the landlord isn't happy with the financial standing of the assignee

[vrockie]

Hi all, apparantly the law was changed recently and the landlord cannot chase the original leaseholder anymore, only something I heard down the pub so no proof.

 

Anyway the landlord is beng very co operative about the lease and is not chasing me at the moment, my wife regularly keeps him up to date and they seem to be fine, so could we get back to my queries above please if you have any advise, thanks

[pussycat10]

Those who were involved in this may be interested to see this press release regarding Watson Hope & Co and their accountancy affairs !!!

Also gives the street address for the postcode

 

Public notice ? Wise & Co, 28 January 2010 | Press releases | ICAEW