The owners and operators of coin and card operated laundries usually don’t become involved in reading or signing any- -legal documents, except for the lease and sales documents that were part of their original entry to the industry, or are part of purchase of new equipment.
That is, -unless they get sued by someone.
Since no one can -really predict the rhyme or -reasons for why lawsuits happen, we will concentrate only on the background and make up of the documents that are usual to a coin or card laundry. We talk about normal legal papers that are more likely to be encountered in the course of -normal -business.
THE LAUNDRY LEASE
Leases are normally unilateral (one sided) -legal -documents. The weight of clauses are to protect property owners and give them -legal advantage if they take a tenant to court. All a tenant really gets is the control of his space for the length of the agreement.
Most leases are written by lawyers who are paid by the hour. One should not expect such documents to be short, simple, or easy to read. Further, recognize that leases are -mostly designed to protect property owners in case a tenant fails to pay rents as agreed. There is little to protect a laundry owner in any lease, except what he insists on at time of signing.
When negotiating or renegotiating leases, don’t do it alone. Use the services of a qualified, experienced broker who specializes in coin laundries, or use an -attorney. Even if it’s only to review the document. Yes, it costs money, but only a little. Not -using such professional services could end up -costing you -everything.
No one should know obligations placed by the lease better than you. Read and carefully note questions you have before signing. Things you will want to know include the length of original lease, number and length of options to renew, what the rent and fees will be and what, if any, restrictions are placed on your business.
After signing the lease, begin looking for an -extension of time by being the best tenant you can be. Pay rents on time, don’t create any problems with your business neighbors and try to run the nicest coin laundry your landlord has ever seen. Make him proud that you are his tenant and you’ll have no further need to protect yourself, after you have -already protected yourself by getting the best lease you could negotiate.
SALES DOCUMENTS
There comes a time when all coin laundry owners need new equipment. Too often they delay the decision as long as possible, but it eventually has to be done. Most operators are not able to pay cash, and so a written finance agreement will be needed. The financial group doing the lending will ask for documents to be signed by the buyer and his or her landlord, and these are serious, binding agreements.
Landlords are asked to sign waivers that allow the lender to recover their equipment without any hassle from the property owner. That’s not your concern, except that there is often reluctance on the landlord’s part. They don’t like others to come in and take out things of value. They feel that when the equipment is removed it is because the business is failing and they will be owed back rent. The value of the equipment is part of their security.
The best argument you have is to make sure the property owner knows that you are current with your rent and you need his cooperation to continue to be a successful tenant. Put that way, they’ll do it.
Now comes the part of the contract that binds you. You need to read it thoroughly and understand the terms and conditions well. What sort of a pay off is there? Is this a straight note, where you can pay it off ahead of the contract date and save money, or is it a typical installment agreement? In the latter, there is no way to save much money by paying it off ahead of time. Which is more flexible and better for you?
ACCELERATION CLAUSE
The interest rate is thought to be important, but what’s more vital to your interests is whether or not there is an acceleration clause. With such a clause in place, they can call the note any time you are a little late with a payment, which could potentially ruin your business. Make sure that the late payment period is reasonable, such as ten days, or don’t sign. You don’t need their money so badly that you would risk losing your entire -laundry investment.
Make sure the agreement covers in writing all of the things that the vendor has said will be done to earn your business. Does the contract spell out the -details of the delivery, installation and factory -freight? Are there areas that could become an extra charge? Surely you consulted with two or more companies before you made a purchase decision. How do they -compare in writing?
WARRANTY & INSTALLATION
Factory warranties could be important to your buying decision. Read and know what they will do before you buy.
Often installment contracts are prepared as leases, which means the lender owns the equipment and the purchaser can buy the product at the end of the term. The buyer expenses payments as paid like premises rent. It may be good to do, but it eliminates depreciation. There usually is a lesser cash requirement to lease than to buy, and some prefer that idea. However there could be tax risks involved. The IRS looks at leases carefully to make sure they’re really not purchase agreements. Be careful and check with your tax advisor.
In fact, the best advice we can impart is check with the experts before you take pen in hand to sign any lease or purchase agreement. Better safe than sorry is more than a motto, it’s good advice. | 