When negotiating a business premise lease, there are several key factors to consider. Here are five important things you need to know:
1. Rental Terms:
Understand the specific terms of the lease agreement, including the duration of the lease, renewal options, rent escalation clauses, and any conditions related to terminating the lease early.
Thoroughly review the lease document to ensure you are aware of all the rental terms. I would also recommend hiring an expert to ensure that the lease is fair and that any legal jargon can be explained if needed.
Is there a break clause included if you have a long term lease? This is something I would highly recommend discussing and researching the duration of break clauses other local businesses have agreed to.
2. Rent Amount:
Negotiate the rent amount and payment frequency that is fair and reasonable for both parties. Consider factors such as market rates, the condition of the property, and any additional costs or obligations associated with the lease.
Along with our quarterly rent we had a ground maintenance fee that was paid to a separate management company. If there were any issues with the external grounds, parking or the gates we needed to contact the maintenance company rather than the landlord.
We were grateful to have negotiated a deferred start date for our rent so that whilst we performed a three month refurb on the clinic and the premise wasn't open for business we weren't having to pay rent.
Some rent is monthly and others are quarterly. Make sure you include this into your business budget and set aside the necessary amount each week. This should also be included in the breakdown of room rental for your team members.
My Glowgetter Beauty Entrepreneur 101 podcast episode nine about earning more money in your business and creating a budget may be helpful when running your numbers https://spotify.link/lVkBvpQwTDb
Another helpful resource is my Profit Lab guide to help you work out your magic number equation, price for profit and develop multiple streams of income.
3. Leasehold Improvements: Determine who is responsible for making any required improvements or modifications to the business premise.
Negotiate the terms regarding who will fund these improvements and whether they will be considered permanent fixtures or removable at the end of the lease.
At my Orchids Retreat Beauty and Wellbeing Clinic, I was responsible for the windows, and everything internally. When I signed the lease a few of the double glazed windows were blown so I negotiated that they be replaced before I took responsibility for maintaining them.
The toilets also needed modernising so the landlord and I negotiated that he would replace the bathrooms and then all other modifications were my responsibility.
We had a great team that helped give the clinic a makeover including replacing and improving flooring, sinks, kitchen and retail units. We negotiated with the landlord that the clinic be repainted so that we had a fresh environment.
4. Maintenance and Repairs: Clarify the responsibilities for maintaining and repairing the premises. Make sure you are aware of any limitations or exclusions for specific repairs, such as structural elements or major equipment. Determine whether the landlord or the tenant will be responsible for these costs.
At the clinic we paid to fix the flooring throughout the six treatment rooms, office and reception area. This resulted in our needing to replace an entire room so that the floorboards could be used to repair the other areas. This was a cost we covered, but we negotiated the new wall heaters to be covered by the landlord.
5. Lease Termination: Understand the conditions and consequences of terminating the lease. Negotiate terms that allow for flexibility in case of unforeseen circumstances or changes in business needs.
Be aware of any penalties or liabilities associated with breaking the lease agreement prematurely. If you can avoid personally guaranteeing your lease and negotiate to pay a couple quarters rent as a deposit instead, this can protect you if you sell your business.
Remember, it is crucial to thoroughly read and understand the entire lease agreement and seek legal advice if needed before signing any contractual agreement. I'd definitely recommend hiring a professional, having expert advice enabled me to walk away after selling my business.
Orchids Retreat Beauty and Wellbeing Clinic 2021-2023
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