Keep Working on that Lease

Lloyd Manning |

CHICAGO — If you’ve been involved in the coin laundry business for some time, or any business for that matter, you probably know that the landlord rather than the tenant usually prepares the lease for business space.Here’s something else you probably already know: the landlord’s lease looks out for the landlord, not the tenant. Some of you laundry owners may have discovered this the hard way.Don’t let some of your past experiences totally sour you on things. The good news is that you shouldn’t assume the landlord’s lease is carved in stone. Depending on local conditions of supply and demand, you may be able to improve the lease a great deal. This can happen when you first sign on, or later when it’s time to renew.Your goal is to give yourself some wiggle room in the future. Hopefully, the landlord will at least listen to your requests. And if empty business space is plentiful in your community, I believe there’s a good chance the landlord will go along — especially if he considers your coin laundry to be a desirable tenant.Let’s look at some ways you can give yourself greater protection and flexibility. You probably won’t find any of these things in your landlord’s standard lease.PARKING CONCERNSI’m sure most of you can speak to the importance of parking at coin laundries. You may be sharing on-site parking with other tenants. Ideally, you’d like some spaces set aside just for your laundry customers. But if that’s not possible, the next best thing is to get a clause in the lease in which the landlord promises not to reduce the total number of parking spaces.ANTICIPATE NEW USESThe landlord’s lease will likely have a clause saying that you’ll use the space for a specified type of business. Pay close attention to that clause. Don’t limit it to just the things you’re currently doing. Someday, you may want to expand the services you provide at the laundry. After all, many laundry operators are constantly experimenting with new services. Make sure the lease’s use clause is broad enough to accommodate you well into the future.RENEWAL OPTIONSA good way to structure your lease is to start with a three-year term. However, there are people in the industry who prefer longer terms. If you start with a three-year term, then you need to provide for several options to renew for additional two-year periods. Otherwise, you’re not locked in for the long haul.GIVE YOURSELF A WAY OUTYou may want to get out of the lease early for any number of reasons. You may need a larger space for your washers and dryers — or a smaller one. The neighborhood may change. You may even want to leave the business. The landlord may agree now to limit your liability for early termination. For example, you can get the right to escape from the lease upon paying an extra two or three month’s worth of rent.LIMIT YOUR PERSONAL GUARANTEEWhen you have a corporation or LLC — and especially if it’s relatively new — the landlord may want you to personally guarantee the lease. That’s fine, but see if you can limit the guarantee. Perhaps the lease can say that if the rent is paid on time during the first few years, you’re personally off the hook for future years.WATCH THAT ANCHOR TENANTIs your laundry located in a shopping mall? Is there a popular grocery store, for example, in this location, a store that pulls in a great deal of customers? Let’s face it, you may have been attracted to space in a shopping mall because you felt the anchor tenant would draw customers to your laundry. What if the anchor tenant leaves? You may be less enthusiastic about the space. Try for a lease clause that says you can vacate without penalty if the anchor tenant moves out.ASSIGNING/TRANSFERRING YOUR LEASEYou may want to transfer your lease to another business, or even sublease part of the space. You can protect your right to do so by a lease clause. The landlord may balk, however. If so, try for this compromise: you need the landlord’s consent to transfer the lease or sublet, but the landlord agrees not to unreasonably withhold that consent.WATCH THAT COMPETITIONYou’d hate to rent space in a shopping mall only to have competition move into the same area. Maybe it’s improbable, but why risk it? The solution is to have the landlord agree in the lease not to rent to another laundry in the same mall, etc.MAKE SURE YOU CAN RENOVATEThe space may be suitable now, but down the road you may want to spruce it up. As long as you don’t make any permanent changes to the structure, it’s reasonable to be able to do so. But to avoid conflicts with the landlord, make sure this right is spelled out in the lease.HAVE THE OPTION TO MOVE ABOUTYou may find a good spot in a shopping center, but really desire a space that is already occupied. The landlord may agree that if the better space becomes available, you’ll have the first right to move into it. A similar clause might give you the right to expand into adjacent space if it becomes available.CHANGING THE LANDLORD'S DRAFTLet’s say the landlord is willing to make some of your proposed changes. How do you do it? The best way is to revise the lease itself — an easy job if the lease is in a computer file. If not, you and the landlord can make changes through an addendum that gets attached to the lease. Either way works.If you use an addendum, it should say that it has priority over any conflicting terms in the main lease.WORKING THROUGH PROBLEMSProblems develop. You may have a problem with your landlord, a customer or even a distributor. If this happens, someone may shout about a lawsuit. Well, more than 98 percent of lawsuits never get to trial. Sometimes the judge throws the case out of court. Most of the time, it’s because the parties reach a settlement — often after long, costly and contentious court proceedings.I suggest considering mediation. It’s efficient and cost effective, and it also works about 85 percent of the time. 

About the author

Lloyd Manning

Freelance Writer

Lloyd R. Manning is a semi-retired commercial real estate and business appraiser who resides in Lloydminster, Alberta, Canada. He has written six business books; his latest, Winning with Commercial Real Estate - the Ins and Outs of Making Money in Investment Properties, is available online from Booklocker Inc., Barnes & Noble and Amazon.


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