Is signing a one year lease risky????????????????????
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[{"id": "gg71tr7", "text": "Rental agreements survive the sale of a property so if you have a right to renew in your existing lease then the new owner cannot deny you that right. The other businesses might be long-time tenants whose leases have expired, generally if there are no renewal options you see a clause that the lease will continue to survive on a month to month basis pending the consummation of a brand new lease agreement", "replies": [], "depth": 1}, {"id": "gg71xw3", "text": "It sounds like the owner may want to redevelop/sell as a redevelopment. Are you getting any tenant improvement allowance?", "replies": [{"id": "gg720q3", "text": "What is that? \ud83d\ude2d\nWould that affect my lease and ability to resign next year if it is sold? Even though it states that i have the option to renew if im not in default? Or do those change once there\u2019s a new landlord?", "replies": [{"id": "ggde3hf", "text": "The right to renew will survive even after the building is sold. \n\nI would strongly urge you not to sign a 1 year lease. Especially if you\u2019re spending any money building out the space. \n\nI would also STRONGLY encourage trying to find a broker who specializes in retail tenant representation to assist you. In my experience, there\u2019s little chance of you getting a favorable deal otherwise. You\u2019re spending hard earned money and taking a risk by opening this business. You should have an advisor on your side. The landlord is in the business of commercial real estate, and you are not.\n\n I\u2019m not sure which market you are in or how big the space is. But you may have a tough time having a super seasoned broker helping you as the fee is likely small but you should be able to find a younger broker willing to work with you and add value. They will be compensated by the landlord so no charge to you.", "replies": [{"id": "gggep1k", "text": "So how long do you recommend if not a one year lease?", "replies": [{"id": "gghh2xb", "text": "That\u2019s a loaded question. I have clients that sign anywhere from a 3 year to a 15 year lease. \n\nThink about this: if you spend $25,000 on new equipment, light renovations, and moving in. You don\u2019t want to have to do that again in 12 months. You want to at least be able to be there long enough to recoup your investment. \nSo if your rent is $2k per month and your renovation costs $25k you need to make $50k in year one to even begin making it worthwhile. But, If you had a 3 year lease you have a longer time period to re-coup the investment so you could amortize the renovation cost over 36 months as opposed to 12 months. Meaning you could target ~$35k in yearly  revenue and still be on track to make your money back. \n\nThis is an over simplification of the scenario but I hope it gets my point across. In my market, a landlord would almost never agree to a 1 year lease. Simply because even they can\u2019t make their money back / not worth the transaction costs to have a tenant in the space for only 1 year, and that\u2019s if they aren\u2019t putting money in to the space. If they give the tenant any money to renovate or offset moving costs they generally require 5 year minimum.", "replies": [], "depth": 5}], "depth": 4}, {"id": "gggr12i", "text": "I am a full time commercial real estate broker for 10+ years and have owned a nail salon.  Right to renew is worthless if it doesn\u2019t define the specific price for the renewal (I.e. if it is for \u201cmarket price\u201d).  While a short lease can get you out of a bind if your business doesn\u2019t go as planned, I agree with others that you may have substantial rent increase risk exposure.  Remember that your first year you will be working to build your client base at your new location unless you are moving from very nearby. \n\nI agree with acol\u2019s other points though finding an agent who is well qualified in negotiating commercial leases who is willing to work on a one year lease for a small salon space sounds like it might be an unlikely scenario.  Be aware of how long it will take for you to get set up and your license issued as it relates to when you start being responsible for rent.   Best wishes.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gg794rv", "text": "That sounds like a bad scenario. No way.", "replies": [], "depth": 1}, {"id": "gg7h5kj", "text": "Why are you getting into this arrangement without an agent? At least here in NYC (chime in if this is nationwide) the tenant\u2019s agent gets paid by the landlord, so there is no reason not to use a pro in your corner who can answer this as any other related questions.  \n  \nPS Mods need to really make placing state and/or country (hi Canada!) in the subject line. So many things are dependent on this that might as well make it a standard procedure subreddit wide.", "replies": [], "depth": 1}, {"id": "gg7kv1o", "text": "One-year lease sounds risky to me. It generally benefits the landlord to have the security of a longer lease term (I work in CRE and our firm's absolute minimum term is 5 years) so there's got to be a pretty specific reason they don't want to give you more than one year. Read your lease carefully to understand what your rights are if the property is sold. And keep in mind that once your lease and option period are up, a new landlord could increase your rent (perhaps by a lot) or, if they want to redevelop the property, they may not let you stay at all.", "replies": [], "depth": 1}, {"id": "gg8tfmy", "text": "Tenant Improvement (TI) allowance AKA build-out allowance is funding that the landlord provides to renovate the space for the tenant. Sometimes its paint and carpet or even just cleaning, however it usually takes a long-term lease for the landlord to justify this investment. My guess is that the landlord intends to redevelop or sell as a redevelopment and doesn't want to deal with buying out existing leases. Might be a cheap way to get started, especially if there is a good inventory of replacement space nearby after your lease is up. I'd think about the cost of moving everything to a new space. \\*Knowing nothing about the nail salon business\\* is the customer base considered loyal to one salon and are they sensitive to absolute location? If you have a customer list with addresses you can use an online tool to plot where they live in relation to the existing location, and then to a few potential replacements.", "replies": [], "depth": 1}]