You Need To Learn More Than You Know About Your Laundry Lease

Too many laundry owners, and other business types, decide to go into business and rent space without really knowing all of the ins and outs of the leases they have signed. Your laundry’s lease is a legal document, the terms of which are fully enforceable in courts of law. It’s not just a piece of paper with a lot of legal mumbo jumbo written on it. When you signed your last laundry lease, did you fully understand all of its terms and conditions? It controls what you can and can not do in your laundry. The lease says how long you can stay there and how much rent you will pay each month. Over the next few pages, we will discuss definitions, various traps and pitfalls of a lease document plus ways and means of negotiating with property owners and agents. We will cite some examples as well. First, you should be willing to spend a little money by talking with an attorney who knows about real estate law. Have someone who really knows what he, or she is doing. Whether you are building a new place, are renegotiating an old location or buying an existing laundry, you really do need sound legal advice. Yes, that advice will cost money, but only very little when compared with the possible risks. Your signature on a lease is a legal commitment that you will pay thousands of dollar each and every month for five or ten years. To be protected against any bad stuff that could be in that lease, isn’t it wise to spend a few hundred dollars now for sound legal advice than it is to spend thousands later defending a lawsuit resulting from a bad lease? The main purpose of the lease, for you. Laundry operators want a good location they can place a laundry in, and make money over time. Only when the approval for a good location can be secured can operators begin to plan their layouts and make the considerable cash layout required for today’s very expensive laundry investment. The definitions of a good lease varies with each individual location and laundry person signing it. However there are several basic things all good leases must have. The first is a reasonable rental factor. Can you afford to be there and still make money? Will that reasonable rent continue to be reasonable throughout the full term of the lease? Perhaps the most fundamental thing of all: is the lease term long enough to enable you to recover your base investment and still have a viable business to sell when you decide to opt out? If the lease or occupancy term is too short, there will be nothing for you to sell when you do decide to sell out. New laundry leases today should cover a period of twenty to twenty five years, or even longer. Experts in our industry say that an original period of ten years, plus enough five year options to renew would be an adequate period of time to allow the laundry operator to recover his or her investment. What types of leases are there? Lease types are generally divided as being either gross or triple net leases. With a gross lease, your payment is fixed and the property owners pay all of their own taxes, insurance and fees. In a gross lease, all of the tenant’s rent is paid on a fixed schedule. If landlord costs go up, too bad for him. With a triple net lease, each lessee pays a share of all of the property owners costs. When the landlord incurs any cost associated with the property your laundry is in, you will be billed for a percentage of that cost. The percentage is equal to your space’s area, by it’s size, in relationship to the size of the center. Given a choice, which we are not usually given, most of us would prefer a gross lease. There is little incentive for the property owner to keep costs low with a triple net lease, and there are possible abuses. For an example. the owner of three centers sent a bill to a coin laundry owner for his share of the cost for resurfacing the parking lot. The laundry owner had a background in asphalt work and so knew it was too much. It turns out the landlord had all three centers done then paid for it on one bill. He charged all three center’s tenants the cost for doing three, and not just one. That landlord didn’t get away with it – this time. It turns out he’d been doing this kind of thing for years. The same, now suspicious laundry owner was also billed for construction and shopping center renovation. All of which was the costs of renovating space for new tenants. It was not for improving the center. He didn’t need a lawyer to get that bill reduced either. If yours is a triple net lease, ask for a clause that requires the property owners to present proof for their triple net billings if asked. Also look for some kind of percentage of rent cap on the costs for triple net, not to exceed a certain percent of the base rent. The following are clauses you need. Exclusivity. You certainly want to be the only laundry in that center. There should be words in the lease that guarantee no other competitor will be allowed in the center. If there is no dry cleaner in the center you should also seek verbiage in the lease which will permit you to offer fluff & fold services and drop off cleaning services. They may want to add a dry cleaner later on. “Laundry and related services” is a term which we personally have asked for and gotten included. Laundry related services include vending of detergents, bleaches, etc. The sale of sodas and candies may interfere with the convenient food store in the center. That should be spelled out in your lease document. Among the most important (to you) clause in a lease is your right to sell your business and to assign the lease. There have been many tales of landlords refusing to accept assignment of a lease without adjusting the rent higher, or even asking for a part of the sales price. Unfair, yes, but it happens. That is why a clause in the lease should read something like this: “Tenant may sell his business and assign the lease to a financially qualified buyer. Approval by the landlord for this sale and transfer may not be unreasonably withheld.” In many states, it’s already part of the law that a property owner may not unreasonably withhold a subletting or assignment, but it would be better if the lease included such a clause as well. Among the words in the lease, ask for a right to sell, or assign while still being able to return if you are forced to take a laundry back from the buyer. Of course, none of us wants to stay on the lease if the laundry is sold for all cash, but circumstances may dictate that an owner is to carry back some paper. In this case the owner will be you, and you need the right to come in and take the business back over. If you are carrying paper for the buyer, that is your security for what he owes you. If you’ve given up lease rights, the landlord could become the owner, and you may lose everything you are owed. There are other business rights you want to see included in your lease. For example, the right to have adequate signs on your place of business to clearly identify you are a laundry business. If there is a shopping center sign identifying the center itself, ask for a slot on that sign. Sure it will cost extra, but the costs will be worth it. Depending on how much parking space is available in the center’s lot, you might need to request that they set aside and identify certain parking slots for the laundry. These slots should be adjacent to the laundry, otherwise you will lose business. Laundry users want to be close because they carry things in and out. Parking is essential for you, as the laundry clientele take more time with you than do the in and out shoppers at other tenants. Here is a quick review. When renewing an existing lease, or getting a new one, always consult with an attorney you feel you can trust. One who knows and deals with real estate matters. After you study the lease offered, review it and note the questions you have. The attorney can explain what those clauses really mean. Don’t fall into lease traps that could cost you dearly. Your are looking for long enough tenure in the space to recover your investment and still have enough time left to be able to sell that laundry at a profit. There should be no barriers to selling the laundry to a qualified buyer, and that you have the right to get off the lease after sale. You need the right to put up good signs and have adequate parking. The landlord should not be able to bring in competition. Now, you know all you need to know to get a good lease. Enjoy the negotiation. But if things are not completely right, walk away. Your willingness to walk is often your best negotiating technique. Just say “no thanks” if things are not right, Other, better sites for you will eventually come along.