Why every massage studio tenant needs a professional lease document review
When I speak at business conventions about negotiating commercial leases for tenants, I conduct a casual audience survey. One of the questions I ask is, “Which tenants had their commercial lease document professionally reviewed before signing it?” More than 50 percent of all business owners openly acknowledge they did so without assistance.
That figure never ceases to shock me. Committing to a formal lease document is an obligation, and costly with regard to both a business owner’s time and money. By blindly signing this document, tenants may encounter financial disaster. However, many entrepreneurs do not know or understand this, and I frequently hear many of the same reasons why business owners did not request a professional lease document review:
- Didn’t know anyone they could call
- No budget to pay for a lease document review
- Didn’t think it was important
- Didn’t think any part of the lease document was negotiable anyway, so why bother
- Trusted the landlord (he was so nice)
- Considered calling a lawyer, but didn’t get around to it
Consider the following scenarios:
- A chiropractor approached a lease consultant for help a few weeks ago. He negotiated his own lease and delegated the document review to a local lawyer who was not real-estate savvy. Unfortunately, many clauses that should have been modified or negotiated were not and now the tenant needed it corrected.
- Another tenant gave her lease document to an attorney who proceeded to modify the entire lease document (at no small cost) without speaking with the tenant or even explaining why changes were made or necessary.
- A franchise tenant visited a lease consultant for a lease document review, and the consultant proceeded to do a 30-point lease inspection (almost the way a mechanic would use a checklist to examine a used car you were going to buy from a stranger.) Following the inspection, the consultant provided a thorough written summary report. Then, he scheduled a one- to two-hour telephone consultation with the tenant to do the following:
- Explain why certain leases were bad for the tenant, and which one were most important to negotiate.
- Explain what step-down clauses (defined as anything less than what is stipulated in the lease) the tenant was likely to achieve and exactly how to negotiate with the landlord on certain points.
- Suggest new clauses that needed to be added to the lease document of which the tenant was unaware. As an example, massage studio tenants can agree to be possibly relocated within a property, if necessary, and the lease consultant asks that the landlord pay for such a move.
- Review any other questions the tenant might have and to define unclear lease document clauses.
Unbeknownst to many massage studio tenants, the entire lease agreement is potentially negotiable. The landlord has loaded the lease document with one-sided clauses in his/her favor. Tenants need not be fearful of negotiating with a landlord, but only fear their own ignorance and inexperience.
By signing a lease document, a commercial tenant is agreeing to pay hundreds of thousands of dollars in rent and cannot take this process lightly. Even if you survive the tenancy and the lease document does not come back to haunt you, when it comes time to sell your business (and assign your lease agreement) the buyer may scrutinize the document closely.
Here are two more points for your consideration: If you want to sell your business, the landlord can opt to reclaim the space back instead of allowing the sale and assignment. Should this occur, you may lose hundreds of thousands of dollars.
If you want to expand on your “Use” clause (for example, if a hairstylist wants to add a tanning bed), or if a competitor moves into the building because you did not think to negotiate for exclusivity, your business could become worthless.
For an entrepreneur who is about to open a massage studio and enter into a lease agreement, it is key to review the paperwork first. In addition, if you plan to buy or sell a studio that involves a lease assignment, you must get some help as well. Commercial tenants are not supposed to be real-estate savvy. Don’t fight it, face it head on and talk to an expert.
Dale Willerton is The Lease Coach—a commercial lease consultant who exclusively works for commercial, office and retail tenants. Willerton is author of Negotiate Your Commercial Lease and frequently speaks at franchise shows and business conventions throughout North America. For a free leasing CD or to talk with a lease consultant, visit www.TheLeaseCoach.com, call (800) 738-9202 or e-mail DaleWillerton@TheLeaseCoach.com.