How to transfer 35 year old leased property & get Royalty payment?
Querist :
Anonymous
(Querist) 15 May 2011
This query is : Resolved
My father has a property (shop) on lease at heart of city for the last 35 years. He has been running kirana & general store in it. However last month he has expired and his wife (my mother) is his successor. Lease agreement was registered in the name of my father. The property has been on lease for 5 years and lease gets extended for another 3 years on expiry. The current lease is going to expire after 18 months.
My mother wants to transfer the shop to her relative/other person on payment of Royalty. Can it be done? How much % of current market price she can get as Royalty? What are the legal process involve in this? Please advice
R.Ramachandran
(Expert) 16 May 2011
Please indicate where are you situated.
You say your mother is the successor - what about you? The lease from private party or from government? Are there any conditions in the lease that the same cannot be sub-let or assigned? Without knowing these particulars, it is very difficult to give a view on your query.
Querist :
Anonymous
(Querist) 16 May 2011
Dear Sir,
Thanx. for your reply. I am situated at patna. Beign wife of my father see is the original sucessor. I don't want anything from it. I just need to help her to get Royalty payment so that she can secure her future. The lease is from private party. There is a clause in the agreement that it can't be sub-leased. I don't want to sell/sub-lease the property. I just want to sell firms name ( 35 year old firm) against Royalty payment. Can we do it?
R.Ramachandran
(Expert) 16 May 2011
If it has nothing to do with sub-letting or sub-lease, then why did you say that the premises is in lease in the name of your father, the lease is extendable by another 3 years etc. etc.
You should have straight away asked the question, whether your mother can sell the 'name of the kirana shop' which has got a goodwill, for a royalty?
The answer is, yes, your mother can definitely sell the said name for a royalty, provided there are purchasers for the same.
As regards the amount of royalty, it is only you who knows the value, can decide and not persons like us who are far away and do not know the worth of the said goodwill.
Querist :
Anonymous
(Querist) 16 May 2011
Yes I wanted to ask whether my mother can sell kirana shop that has got a goodwill.
kirna shop is not like top companies where you can do valuation on the basis of assets & future cash flow.
I think royalty of a small busines like kirana shop is done on the basis of location of the shop, current market vlaue of the property & buyers interest.
But my concern is that the shop is running in a property that was taken on lease by my father 35 years ago. Can the buyer change the form/type of business after purchasing the business?
How do I form an agreement with the purchaser. Do I need to consult the owner of the property? How does the purchaser interact with the original owner of the property?
It will be great if you can advice on this or let me have an interaction with you on phone. I have your no. listed here.
Guest
(Expert) 16 May 2011
What I could understand is that yours is not a case of transfer of property but the sale of goodwill of your father's firm. Goodwill has no market value, but a considered value based on its earning capacity over the years of existence.
So, besides the cost of the material of the shop, you can also charge a fixed goodwill value, as based on the annual turnover of some years past and profit making cpacity from the firm to be decided on mutual understanding, as your mother may be transferring the earning and profitable capacity to some one else.
About lease, you can also sub-let the lease on some fixed extra value than your mother actually will have to pay. That will be another source of profit.
However, if some hinderance comes in the sub-letting of the lease, your mother can become partner of the firm with some percentage, like 5% or 10% of the firm's capital by making that as a partnership firm. That way your mother can continue to be the lease holder on behalf of your father.
