The ideal property is sitting there and you want to get in as fast as possible to start trading. As this is a new venture you will no doubt be leasing the property. You have a draft lease ready to sign. Do you waste time and money referring it to a lawyer?
A commercial lease can be a complicated document. It is potentially full of pitfalls which an untrained eye may not pick up. You want your business to be successful so it is perhaps not in your best interest not to get expert legal advice. After all don’t you want to ensure that you are aware of the legal issues before entering into a legal contract?
It is usual practice to first negotiate an in principle schedule of agreed points. This is called the ‘head of terms’. This document is not binding, but it allows the lawyers to ensure that the lease reflect what you have agreed: the lawyers acting for the Landlord can draft the lease and the tenants lawyers can use this document to ensure that they have followed the agreed terms.
Here are some important points that you should consider including in the heads of terms:
Rent Free Periods
Fitting out a restaurant can be expensive and time-consuming. Even when you commence trading it may take a little time to attract clients to your new restaurant. You need to consider this very carefully as during this period you are unlikely to be receiving income.
As such you should be considering asking the landlord for a Rent free period. You should encourage your potential landlord to work with you to make the business a success, so you can both benefit in the long term.
You will need to consider what works are required to furbish your new restaurant. All leases will have considerations as to what you can and cannot do regarding works at the premises. Generally Tenants will need permission to carry out works and this not only from the Landlord but also from Jersey planning and building control.
While stating the obvious you need to ensure that you have permission to carry out the works you plan (at least in principle) before you enter into the lease.
Tenants of restaurants tend to take a lease of part of a building only (e.g. the ground floor only).
If you are only taking on part of the landlords building, you will need to obtain agreement from the Landlord to keep the rest of the building, especially the structure, exterior parts and roof, in good repair. This could cause you additional costs or a loss of revenue if the landlord argues that it is not his responsibility. You should also be careful to consider what responsibilities you have in relation to repairs and decoration.
Moreover you need to consider service charges. This is a cost usually found in a commercial lease and allows the landlord to recoup additional costs from you. In general terms Jersey leases will contain such a clause. As such consideration should be given to limiting your exposure to these costs.
Right to Break
Risk should always be considered when starting a new venture. Just in case your restaurant does not take off. You should therefore always try to agree a right to break the lease early on in the term (for example on the 2nd or 3rd anniversary). That way, you know that you won’t have to find a way of keeping up with rental payments until the end of the lease for a Property you would rather be without.
Licence for clients to sit outside
There is a trend in Jersey to have outside restaurant seating. Remember the lease guides what you can do and as such If you intend to put seating for customers outside, make sure early on that the landlord will allow this. It is also likely that you will need a licence from the parish to put tables and chairs for your restaurant in the street.
Hours of trading
You should also bear in mind that the Landlord will have the right to impose hours of opening. Therefore ensure that you reach agreement with him as to trading hours (subject to planning restrictions and other applicable laws).
There are numerous other issues to consider but this overview should give you an idea of the points to look out for. However please remember that legal advice at the outset could save you a lot of money and angst in the future.
How Parslows can help
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The information and opinion expressed in this briefing does not purport to be definitive or comprehensive and are not intended to provide professional advice. For specific advice, please contact Parslows, We are not responsible for, and do not accept any responsibility or liability in connection with, the content of this document or any reliance upon it