Chapter 5 Types of Leases and Rent Agreements

Basic Inclusions Rent agreements clearly state the name of the owner and the lessee state the location of the property to be leased contain a description of the property state for what purpose the property is to be used include the signature of both parties and that of a notary public There are several basic inclusions for every rental agreement. Discuss the content on the slide. Rent will likely be required in one of three ways: Yearly Monthly A yearly rate with a percentage clause 2

Basic Inclusions Rent is stated as: yearly rate monthly rate yearly rate with a percentage clause © Milady, a part of Cengage Learning. Photography by Dino Petrocelli There are several basic inclusions for every rental agreement. Discuss the content on the slide. Rent will likely be required in one of three ways: Yearly Monthly A yearly rate with a percentage clause 3

Complex Leases Returning-the-property clause NNN charges lessee will return the property to its original condition or better when vacating the property NNN charges Common area maintenance + Insurance for the shopping center + Real estate taxes for the shopping center Details may appear in more complex leases that greatly impact the salon and spa success. Be sure you understand each clause included in a lease and how it may affect your business before you sign anything. Discuss returning-the-property clause and NNN charges using the content on the slide. 4

Complex Leases Common area maintenance Insurance Real estate taxes expenses and services for all tenants that share a common exterior of the property Insurance insurance landlord needs for shopping center as a whole; your business insurance is separate Real estate taxes taxes charged to the landlord by a municipality based on their system of value of the shopping Discuss the content on the slide. 5

Complex Leases Liability clause for the property Sublease clause salon and spa owner may be responsible for the sidewalk and parking area equal to the width of the salon and spa to the street Sublease clause allows the salon and spa owner to set up a concession and seek rental income Discuss the content on the slide. 6

Complex Leases Major decorating clause Thirty days’ notice clause lessee might need the permission of the owner before remodeling Thirty days’ notice clause allows the landlord to show your space to prospective tenants a certain number of days before you terminate the lease contract Discuss the content on the slide. 7

Complex Leases Single-business or exclusive clause states that yours will be the only salon and spa in the shopping center or leasing area you should try to get an exclusive clause on as many services as possible to give you options as your business grows Discuss the content on the slide. This particular clause is important to you as a business owner because it influences how close your competition is to your salon and spa. Sometimes the requirements are so specific, the distance that a competitor must be from your salon and spa can be measured in feet. 8

Complex Leases Deposit clause states the landlord will hold your deposit money—usually one month’s rent and possibly one month’s NNN—to cover any damage to the property that is not considered normal wear and tear Discuss the content on the slide. Protect yourself by noting all damage and/or missing items before moving in and having the landlord sign a list of these. Take pictures before you move in and after you move out, and include them with your list (date-stamped pictures are even better). 9

Complex Leases Property waiver will exclude property that is not yours from seizure by the landlord and will protect you from having to pay for property you no longer have control over Discuss the content on the slide. This pertains primarily to rented or leased equipment. 10

Complex Leases Loss-of-use-of-property clause during an extensive remodeling or exterior maintenance project, you may not have access to your salon and spa should contain a provision that allows for a space that is the same size or larger to be available to you as soon as remodeling is completed or during any of the processes Discuss the content on the slide. A lower rent should also be requested of the landlord during this period or possibly longer to help get your business back to its original volume. 11

Complex Leases Subleasing clause determines who selects the company that will do the work on subleased space you should discover if additional rent can be obtained by the landlord should the salon and spa decide to expand or remodel during its lease term Discuss the content on the slide. 12

The Tentative Contract If the space can pass zoning rules the space can pass state board of cosmetology rules and regulations you can get all of the permits that you need to open Then on a given date, you will sign the lease agreement A tentative contract essentially lets a landlord know that you are committed to renting the property, but only of the necessary elements for your salon and spa success come together. 13

Arranging a Lease Arranging a lease is a four-step process: select a location convenient to the clientele you wish to serve determine what businesses will help your business have ready all information about yourself and the business you wish to operate for your first meeting with your landlord arrange for a tentative contract and first draft of the final lease contract Decide who you want your clientele to be and make sure you are convenient to them. Some neighboring businesses will not bring people ready to visit your salon and spa, while some will. 14

Summary All leases state certain things: the owner’s and lessee’s names the day and sometimes the time the lease begins the day and sometimes the time the lease expires the location and description of the property for what purpose the property will be used Additional items may appear in more complex leases, and these should be carefully read Discuss the content on the slide. 15

Summary Arranging a lease is a four-step process There are several types of leases/rent agreements that should be considered Rent can be charged in one of three ways: monthly, yearly, or yearly with percentage Discuss the content on the slide. 16