Here to answer all of your Barbershop lease questions you’ve ever wanted to know, we spoke with Denise Ferguson of Find Surveyors.
What should shops know before taking on a lease?
In short, you don’t have to accept the terms that are offered – you can negotiate. Without getting a valuation, you are potentially pushing the rental valuation up in your area. Surveyors are the only people qualified to value the rental valuation of property.
Should I get a short- or long-term lease?
If you know that this barbershop isn’t your long-term goal, you may wish to agree to a short-term lease and move the shop’s location. Or, you might want to agree to a long-term lease, with break options, to give you stability. Or, you could agree to a long-term lease with a plan to sell in the future – then you can build up accounts to the value of the shop.
Do I need a break clause?
While they do give you a fixed date of when you can break the lease, there are other alternatives. Often, when a business owner finds themselves needing to action the break clause, it’s rarely at a time that it can be actioned. Being able to assign the lease would be far more beneficial to most business owners.
I want to rent out a chair in my barbershop. Does the lease need to factor this in?
Most leases would automatically prohibit you from renting out chairs, so check! You would need to agree to the ability to sublet, in order for you to issue a lease (or licence) to people you are renting space to. Many barbershops treat renters as self-employed staff, but giving away space in your shop, to another business, is a property transaction and needs to be documented within a lease, not a self-employed contract.
How often can a landlord make rent increase?
It’s standard practice for longer leases to be five-yearly, and shorter three-yearly. I’m not a fan of Retail Price Index (RPI) increases, because this artificially increases market rent during times of market downturn. Open market rent reviews reflect what the market is doing, as long as tenants don’t just agree to whatever increase they are given, and seek professional advice when they receive a rent review notice.
5 TOP TIPS
TAKE NOTE OF THE BELOW WHEN TAKING ON A LEASE
1. Service charge
This would also include a sink fund (where service charge monies are kept on account for future big projects). For example, roof repairs! Service charges should only be paid for the costs of maintaining areas of the premises that you benefit from.
2. Insurance rent
Landlords generally insure the building, and the tenant pays the landlord back for this cost by way of insurance rent.
3 Business rates
You can check the business rates costs online, prior to taking on a property. Build them into your business plan before you agree to a lease.
4 New utilities.
If you want an additional electricity line, or gas connection, watch out for big costs and delays. Fit out costs can be anything from £5k to £100k.
5 Utility costs
Think about utility costs and the cost of putting in professional help. Maybe factor in getting professional help to get the lease right for your business (our prices start at £1,250.)
Denise Ferguson is the founder of Find Surveyors and has a background in commercial property spanning 15 years.