Renting Premises for a Barber Shop

By: Scott McBride - Updated: 9 Sep 2012 | *Discuss

 

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Renting premises is the best option for most new barber shop businesses. Financially speaking, renting will often make good business sense as it ties up less capital than buying, freeing up cash that could be used elsewhere in the business.

There is less risk of unexpected financial shocks when renting. There is no need to worry about capital gains tax unless selling on the lease for a premium and falls in property value will not affect those who rent unless they want to sell the remaining term on the lease to someone else.

A barber shop business that rents premises will have greater flexibility as it will not be locked into property ownership. Usually it is straightforward to agree the length of the lease required with a landlord. Leases will tend to have agreements of between three and 25 years and can offer long-term stability, but lease lengths are getting shorter and the average length of a business lease is now below eight years.

Short Lease is Best

When starting a new barber shop business it makes sense to consider a short lease of three years or less. It is even possible to have a break clause included in the lease to allow the lease to be ended if, for example, the time comes to relocate.

Those who rent business premises are not exposed to interest rate rises, but be aware that rent may rise now and again as a result of rent reviews. Always check the lease to see how rent is reviewed before signing it. Commercial rent is normally paid quarterly in advance, but a landlord may agree to monthly payments. Renting gives space for negotiation, so do not be afraid to negotiate any aspect of the lease, either before it starts or when it is due for renewal.

In general, external maintenance of the building is likely to be the responsibility of the landlord. This is particularly true in multi-occupancy premises, although the lease may require a service charge to be paid. Check how much the service charge is, what services are covered and what, if any, facilities have to be shared with other tenants.

Challenge Service Charges

Service charges may include cleaning and heating, but can be more expensive than if the tenant organised such services themselves, so be willing to challenge service charges. Repairs and maintenance inside the building are more likely to be the responsibility of the tenant, although this will depend on the terms of the lease.

Contracts can be complicated and it can be worthwhile employing professional help from a solicitor or chartered surveyor. This can be expensive, but mistakes can be even more costly to put right.

When budgeting for barber shop premises, remember to allow for utility bills, maintenance and repair bills, stamp duty – payable on all commercial leases, business rates, a deposit – usually around three months' rent – and service charges as well as rental costs. Most landlords will request references to confirm a tenant is able to pay the rent and other liabilities under the lease, so it worth having a guarantor.

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