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Management Practices

Smart Tips for Negotiating A Lease

Allyson King | November 23, 2015 | 11:34 AM
Shannon and Allyson King celebrate the new space they recently found for Hair & Co. BKLYN.

We have a location!!!!  Well Almost.

We met Eddie this morning, and he had an interesting smirk on his face.  While we were negotiating with the existing salon he was working with the owner of the 1,300 square-foot space with full basement and backyard.  We really liked the space, but really felt it was too expensive for all the work that needed done.  

Jackpot!  Eddie negotiated the larger, cooler space for the same rent as the smaller one!  We submitted a Letter of Intent (LOI) outlining our interest in being their tenant and our requested lease terms:

  1. 10-year lease, with a 5-year option to renew.  The longer the lease the more leverage you’ll have negotiating annual rent, improvements and free rent for build out.
  2. Rent price, taxes and triple net (shopping center maintenance, snow removal etc.) all add up to what you will pay each month.  Negotiate them all, some landlords will be flexible in one area but not another. 
  3. Rent increases—landlords will typically target 3-10% increase annually, we negotiated.
  4. Consumer Price Increase (CPI)—our rent will grow as fast only as the economy.
  5. Free rent for build out - Start at 6 months it’ll give you cushion for negotiation and if they agree you’ll have a month or two open with no rent. We negotiated four months.
  6. Exclusivity for any and all services you will and might perform.  Ensure you’re the only salon or spa in the trade area owned by your landlord. 
  7. Landlord improvements or money towards leasehold improvements (your work).  Landlords will often spend money to get the right tenant in.   Our location is a cold dark shell, which means not much of anything including no A/C or heat.   
  8. Security deposit expected is often three months + first month rent, if this is your first business they could ask for six months.
  9. Ability to transfer the lease to a new qualified tenant is important you need an exit strategy.   Landlords may require same use which could be an acceptable fall back position. 

Remember negotiations typically takes 60 days from LOI to signed lease.  Give yourself room to negotiate.  Your real estate broker will do the negotiating of the general terms and put the LOI together for you, let them play hard ball so you can remain the sweet potential new tenant.

HOT TIP: It’s like buying a car, stay cool and let the “game” play out.  You’ll have to live with the deal a long time.  Your real estate broker will guide you for what’s typical and worth it, the only time I’ve seen very little room for negotiation is in an A/A+ lifestyle center/regional mall as they have tons of demand and don’t have to negotiate.

Holy cow, fastest time ever.  In three days we’ve agreed to an LOI, it’s time for our landlord to produce a lease and our real estate attorney and insurance agent to review it.

Did you miss Allyson King's former blogs as she and her husband Shannon open their dream salon in Brooklyn. Catch up with these!

Buying an Existing Salon, Is it Worth It?

A Lesson in Real Estate from the Kings

Searching for the Perfect Real Estate

Brooklyn is Our Muse

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