Tanning tenants have a great deal to think about prior to committing to a long-term commercial lease. Amongst everything else, they must view commercial sites available for lease, evaluate these for their own suitability, select an appropriate lease term, have their Lease Document formally reviewed and so on. Let’s look at some common questions surrounding several preliminary “taking possession” and “moving in” issues.
Is it better to lease a location, buy a business condo or construct my own building?
There are pros and cons to all three options. Leasing prime real estate may be affordable, while buying may not even be a possibility. However, it always feels better paying down a mortgage than forever writing a rent check. Leasing is more immediate, while building is more permanent. Sometimes, mortgage payments are less expensive than lease payments. Because the system is set up so that leasing opportunities greatly outnumber purchase options, only a fraction of my clients hire me to help them buy a property. If you are not sacrificing your own location requirements (including visibility and accessibility), then a great option is to buy a condo or property for your tanning business.
The Lease Agreement I am looking to sign states that the landlord can regulate my business days and hours. I am concerned about this clause, but what can I do?
Some tanning tenants do need to be concerned about this type of clause if they want to control their own hours. Retail landlords want their tenants to remain open a maximum number of days and hours for a couple of reasons. Many retail tenants have a “percentage rent” clause which states that the landlord can collect the maximum amount of rent possible. However, in some properties, it’s a perception issue. If all the neighboring tenants are not open regular hours and days, this can negatively affect other tenants. This clause is negotiable – within reason – but remember it may actually protect you. Talk to your landlord, come to an understanding and then put this agreement in writing.
Do I need an attorney’s help in the leasing process or can I do this on my own?
Practically every tanning tenant can use some help in the leasing process. Many tanning tenants think the realtor may be helping them, but, in fact, the realtor may be working for the landlord, on-commission. Some attorneys are good to work with, providing they have commercial real-estate experience. Other attorneys will try to help you without leaving their office, or just writing letters instead of negotiating personally or by telephone with the landlord. I recommend that you find yourself a reputable Lease Consultant who will actively participate in the entire process with a very hands-on attitude. While many tenants use an attorney to review the lease documents, a seasoned Lease Consultant can provide the same – if not better – service, and generally at a lower cost.
Is it better to sign a five- or 10-year lease term?
There is no absolute answer to this question since individual requirements vary from tanning tenant to tanning tenant. You may wish to look at a three-year term with several renewal options. Realtors will often press tanning tenants to sign a five-year term to maximize their commissions, even if the landlord would have settled for a shorter term. If you are investing a substantial amount of money on leasehold improvements, then a longer lease term is justified. For start-up tanning salons, predicting future success is difficult. In such cases, I’ve been able to negotiate for the tenant to sign a long-term lease with the right to terminate – should the business not perform as expected.
Want to see your leasing question answered? E-mail dalewillerton@theleasecoach.com and watch for the answer on LookingFit.com!
Dale Willerton is “The Lease Coach” and a senior lease consultant who works exclusively for tenants. As an ITA member, The Lease Coach has spoken at many North American tanning conventions (including the recent 2010 West Coast Tanning Expo in Las Vegas). Willerton is the author of “Negotiate Your Tanning Salon Lease or Renewal.” Call him at 800.738.9202, e-mail dalewillerton@theleasecoach.com or visit www.theleasecoach.com or www.helpuleasetanning.com.
