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Wanted: “Respectable and Responsible” Burger Flippers

Wanted: “Respectable and Responsible” Burger Flippers

Gary Moffat

Landlords are always keen to protect the value and integrity of their investment properties. Almost all commercial leases contain some wording to ensure that the lease cannot be transferred to another entity (whether an individual or a company) without some safeguards built in. This ensures that any new tenant is going to be of sufficient substance to properly look after the landlord’s investment.

The Court of Session in Scotland has recently looked at one such safeguard for a landlord client of ours – namely that any tenant to whom a lease is transferred must be “respectable and responsible”.

Most of us, if asked, would be able to articulate what we think those words mean. But as with all words used in a legally binding document, they have a specific meaning in this context.

In this case, our client (the landlord) had leased a commercial unit in Kilmarnock to Burger King for the operation of one of its restaurants. The unit is located near to an Odeon cinema and so has regular “leisure pound” traffic passing by.  Burger King wanted to sub-let the unit to a franchisee – a newly formed company. That company had no track record of trading to demonstrate that it met the test of being “respectable and responsible” in its own right.

Burger King relied upon the reputation of both the individual that owned this new company and of his other companies – all of whom had longer trading histories than the proposed tenant. They claimed the landlord was being unreasonable in denying a transfer to the new company in these circumstances.

The court decided that the landlord was correct to refuse to agree to a transfer to the new company. The new company did not meet the test of being “respectable and responsible” in its own right.

The judge took the view that “respectability" referred to the manner in which the company in question conducted its business and to its reputation and that "responsibility" referred to its financial capacity. Burger King had not provided sufficient information on the new company to demonstrate that it passed the test

The full decision can be found here:
http://www.scotcourts.gov.uk/opinions/2014CSOH36.html

Gary Moffat
Partner

LChalmers