Hairdressers Journal
Hairdressers Journal


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A NEW LEASE of life

What should salons know before taking on a lease?

In short, you don’t have to accept the terms that are offered – you have the right to negotiate the terms of the lease. By accepting what the landlord offers, without first getting a valuation, you are potentially pushing the rental valuation up in your area without realising. Surveyors are the only people qualified to value the rental valuation of the property.

Should I get a short- or long-term lease?

Your decision to have either a long or short-term lease should be based on the plans of your business. If you know that this salon isn’t your long-term goal, you may wish to agree to a short-term lease and move the salon’s location for example. Or, you may wish 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 the salon in the future –that way you can build up the accounts to show how valuable the salon is.

Do I need a break clause?

They are important if you plan to use them. While they do give you a fixed date of when you can break the lease, there are many other alternatives a salon can explore. Often, when a salon owner finds themselves needing to action the break clause, it’s rarely at a time the break clause can be actioned. Having the ability to assign the lease would be far more beneficial to most salon owners.

I want to expand into additional services, but my lease does not permit this. Help!

If your lease states that you can only operate as a hair salon, this does not necessarily mean it prohibits you from also offering nail services for example. The primary function of a hair salon could be argued to include additional services, such as nail or beauty services. However, if the lease expressly prohibits nail services, you would need to seek a Deed of Variation to amend the lease to allow you to include additional services. This will often be reflected in the rental valuation of the property. A restricted user clause is less valuable than an open user clause. As such, I would negotiate a small increase in rent, to allow nail services. Plus, agree to pay for the Deed of Variation. This would usually be sufficient for a landlord, unless there is a genuine reason for not allowing the additional services (for example, if the landlord owns a nail salon next door.)

I want to rent out a chair. Does my lease need to factor this in?

Most leases would automatically prohibit you from renting out chairs, so it’s really important to check your lease if you are doing this without permission. 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 salons treat renters as self-employed staff, but giving away space in your salon, to another business, is a property transaction and needs to be documented within a lease or licence, not a self-employed contract.

Most leases would automatically prohibit you from renting out chairs, so it’s really important to check your lease

How often during a lease period should the landlord be able to make rent increases?

It is standard practice for rent reviews to be every three or five years. Longer leases would 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 FIVE COSTS TO TAKE INTO CONSIDERATION WHEN TAKING ON A LEASE (APART FROM RENT!)

1SERVICE CHARGE This would also include a sink fund. Sink funds are service charge monies kept on account for future big projects. For example, roof repairs. Service charge should only be paid for the costs of maintaining areas of the premises that you benefit from.

2INSURANCE RENT Landlords generally insure the building, and the tenant pays the landlord back for this cost by way of insurance rent. It is always worth asking for a copy of this insurance policy and premium, to make sure you are only paying for the portion that you are occupying or benefitting from.

3BUSINESS 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.

4UTILITY COSTS Think about utility costs and the cost of putting in new utilities. If you require the installation of an additional electricity line, or gas connection, you could find yourself with costs in the thousands, and big delays. Fit out costs for a salon can be anything from £5k to £100k.

5PROFESSIONAL HELP I’d recommend factoring in getting professional help (our prices start at £1,250) to get the lease right for your business.

Denise Furguson is the founder of Find Surveyors and has a background in commercial property spanning 15 years.

This article appears in the September 2021 Issue of Hairdressers Journal

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This article appears in the September 2021 Issue of Hairdressers Journal