Lease like a pro: The ins and outs of retail leasing
If you’re itching to open up your very own storefront, but feeling a bit overwhelmed by all the legal stuff, you’re not alone. Understanding the legal jargon and nitty-gritty of retail leasing is crucial to protect your business and your investment. That's why we're here to break it down for you, leaving you with more time to focus on the exciting bits of launching your dream café, salon, gym or retail store! Sound good?
Location is a big deal when it comes to retail leasing, as it can make or break your business. It's important to think about foot traffic, accessibility, and proximity to other businesses. Don't forget about zoning regulations that may affect your business, either. We're here to help you navigate these legal waters, so you select the perfect retail space or shopping center for your new business.
Retail leases often require tenants to make improvements or modifications to the space, like installing fixtures or building out fitting rooms. Negotiating these terms is essential so that you can discuss who will be responsible for paying for them and who will own them at the end of the lease term. Remember to make sure that the terms are reasonable and within your budget.
Like commercial leases, retail leases have specific terms that you should pay attention to. These lease terms are a legal agreement between the landlord and tenant that outlines the details of the lease, including rent, length of the lease, additional fees or obligations, and renewal options. You need to review this agreement thoroughly before signing on the dotted line.
To help, we outline some of the key terms you should know about below.
‘Rent reviews’ can have a big impact on your business's bottom line. Basically, rent reviews allow for adjustments to be made to your rent over the course of your lease. You might be thinking, "Uh oh, that sounds like it could cost me a fortune!" But don't worry, there are different ways that rent can be adjusted, like using a fixed percentage increase, a market rent review, or a combination of the two. Make sure to carefully review the rent review terms in your lease agreement and negotiate them to make sure they're reasonable for your business.
‘Security’ refers to the requirements for tenants to provide some sort of financial security to the landlord. This could be in the form of a cash deposit, bank guarantee, or personal guarantee. It's important to understand what type of security is required and the terms under which it can be returned to avoid any unexpected financial surprises.
‘Make good’ might sound like a weird term, but it's actually an important requirement in retail lease agreements. Essentially, it might be that you're responsible for returning the leased space to its original condition at the end of the lease term. This might involve removing fixtures, fittings, and other alterations you made during the lease term. So, make sure you review the make good provisions in your lease agreement to understand your obligations and any associated costs.
‘Permitted use’ refers to the specific uses that are allowed within your retail space, as defined in your lease agreement. It's important to understand what your space can and can't be used for to avoid any issues down the line.
Landlords might offer' ‘incentives’ to tenants to sweeten the deal and encourage them to lease a particular space. This could include things like rent-free periods, fit-out contributions, or other financial incentives. While these incentives can be great for your business, make sure to carefully review the terms and conditions associated with them, as well as any repayment obligations if you need to terminate the lease early or if certain conditions aren't met. Always negotiate the terms of any incentives offered to ensure they work for your business and won't end up costing you in the long run.
They key is to not let the legalities of retail leasing take the fun out of opening your dream store. Keep your eyes peeled for a great location, get your negotiation game on for improvement terms, and carefully read all those lease terms like rent reviews, security, make good provisions, permitted use, and incentives. That way, you can finally focus on the fun stuff - bringing your dream shop to life!
And hey, if you're feeling a bit lost in all the legal jargon, don't you worry, our team is here to guide you through the stormy waters and answer any of your questions. Contact us to discuss your specific needs.
