News & Insights

Avoiding Start Up Problems When Opening Shop

It is a moment when dreams begin to take the shape of reality.

After countless days of hard work and planning, you are finally ready to put pen to paper on what will be your new store, restaurant or office space. Unfortunately, this is far too often the same point of the story where the dreams of business owners can create nightmares that cost small fortunes unless proper steps are taken.

Leasing out new space for a business can be an emotional time filled with excitement, anxiety and uncertainty. As a result, people frequently rush into leases with landlords that they have no business signing. Most leases are prepared with language geared to deflect liability from the landlord. This is not to criticize landlords, as they too must protect their own business interests in the transaction. However, there is a common misconception that leases are some sort of magical documents that could never be edited in Microsoft Word.

There is nothing wrong with suggesting changes to a contract or lease before signing. In contrast, many things typically go wrong when changes are not suggested.

Commercial space for lease as an office, restaurant or retail is rarely in pristine condition to suit the needs of the new business. That is why many commercial properties are offered for lease in “as is” condition. It is always wise to have an experienced real estate attorney review the particulars of the landlord and tenant responsibilities and obligations in an agreement before it is finalized.

Take a new restaurant as an example. Most new restaurants operate on a tight budget just like everyone else and are not choosing a space because it is the most expensive option available. More often than not, new business owners are making their own concessions in order to be able to afford a space they desire. In reality, these concessions can end up costing more than what it might have been to acquire a more expensive space.

Concessions typically are made by tenants as a result of commercial space being offered “as is” when the desired space actually requires some modernization or renovations. These commercial spaces often lead to additional renovations below the surface of the contract. Restaurants are under intense regulations and face penalties if found not operating up to the various local building and health codes. Restaurants are sometimes penalized for problems that may have existed before the new tenant even occupies the space.

Typical problems include outdated smoke and carbon monoxide detector systems, insufficient accommodations for the handicapped and disabled, unsanitary conditions for employees in kitchens or restrooms and exterior problems such as the condition of parking. More obscure problems may lead to additional legal problems for the tenant. Such problems that could lead to liability exposure may include flooring around walkways or the entrance which may have a propensity to become slippery.

New tenants may find themselves overwhelmed by how these factors can affect their new business or worse, cost them large sums of money. However, acquiring the counsel of an attorney can prevent these problems from occurring in the first place. Experienced attorneys face these types of dilemmas with clients on a daily basis and have a greater capacity to work with landlords and/or tenants to work towards accommodations satisfactory to the needs of both sides. Negotiations may include making arrangements in the lease for the landlord to provide necessary property renovations and improvements before the opening of the new business. Well drafted leases may include language where the landlord provides a tenant allowance whereby the landlord agrees to pay the cost of the tenant requested improvements.

Experienced counsel may also provide advice to the new business owner. Many factors and issues are at play when locating your new home for the business and the lease that will govern. Proceed with caution and do not sign anything with regard to the desired commercial space until after obtaining legal advice.




Tags: , , , , , , , , ,