Sharing Commercial Property


Our firm was recently consulted by a small business owner who wanted to sell his business.  He had a buyer who was keen to sign a contract, however our small business owner had one problem – he had allowed an independent salesman to operate a “kiosk” type business in the middle of his shop and this salesman was refusing to leave. 
The owner thought he was adding value to his business by allowing a salesman to set up a kiosk in the middle of his shop and sell products that complemented his.  However, when the small business owner told the salesman that he intended to sell his business and he would have to remove his kiosk from the shop and find alternate premises, the salesman ran off to the Federal Court to seek an injunction to restrain our small business owner from evicting him. 
The salesman claimed that although there was no written agreement in place, the owner had granted him a licence to trade his kiosk in the middle of the shop for a fixed term of 5 years up to and including December 2008.  The salesman claimed that the business owner had no right to evict him until the expiration of the licence period.
The business owner, of course, disputed the grant of licence.  He said that although he allowed the salesman to set up a kiosk in his shop, the parties never agreed on the precise terms on which the salesman was entitled to occupy and use the kiosk area.  The only term which was agreed, was the payment of a modest amount of rent.  
Although the salesman’s proceedings in the Federal Court are fraught with problems, the business owner will now be put to the expense of defending the salesman’s application for an injunction.  If an injunction is granted, the owner will not be able to evict the salesman and will lose the buyer who is keen to buy the business. 
The moral of the story is to seek advice when you are considering sharing commercial premises.  Be clear whether you are entering into a lease, a sub-lease or a licence and above all, make sure that any agreement is in writing with clear termination provisions.  That way you will avoid ending up like our poor small business owner, who will now be embroiled in litigation.
For advice in relation to leases, sub leases and licences, please pop in to meet with us or call us on 8296 6222.