Leases and Landlords
You’ve decided on your concept, you’ve planned the menu and taken care of all the other finer details except the business premises. Before you rush off and sign any lease, there are a few things you need to consider...
- Location, Location, Location
Location can make or break your business. Some businesses do not rely on passing trade which means there is more flexibility in choosing their premises. As a restaurant, you will be relying on passing trade and there’s no point in having the most stunning premises if no one knows you’re there. You will need a place that easily accessible and offers ample parking.
- Do Your Research
Before signing on the dotted line, consider asking a few of the other tenants about their experience of the landlord. You could ask them questions such as how well the building is managed and, if it is a retail centre, is the centre marketed well. You should also consider paying an attorney to look over the lease and explain any potential problems to you.
- Consumer Protection Act
The Consumer Protection Act (CPA) came into effect on the 1st of April 2011 and brought about a number of changes which are applicable to lease agreements. The CPA mainly affects the smaller retail tenants as these tenants will generally enter into a lease in their private capacity. The CPA does not apply CCs, companies, trusts, partnerships and associations which are considered ‘Juristic Persons’. Under section 14 of the CPA which applies to individual tenants of commercial and private property, the follow provisions apply:
- Lease agreements have a maximum duration of 24 months and will continue on a month-to-month basis once the lease has expired unless a new lease has been signed.
- The tenant can cancel the lease agreement (regardless of the term) at any time provided they give the landlord written notice a minimum of 20 days before the intended date of cancellation.
- If the tenant cancels the property lease early, they are still liable to the landlord for any amounts owed in terms of the lease up to the date of cancellation and the landlord may impose a reasonable cancellation penalty which will be agreed upon between the landlord and tenant.
- The landlord may also cancel the lease at any time if the tenant has committed a material breach of the agreement. The landlord will need to give written notice of a material failure and invite the tenant to comply with the lease. If the tenant fails to remedy the breach with the stipulated time frame in the notice then the landlord may cancel the agreement within 20 business days after giving the written notice.
- If the lease is not terminated prematurely by either the landlord or the tenant then the agreement will run its course and it will be automatically continued on a month-to-month basis.
- The automatic renewal of contracts will only be permissible where the landlord has given the tenant written notice of the impending renewal. The renewal must be given no more than 80 business days and no less than 40 business days before the intended date of cancellation.
- The agreement needs to be written in a plain and understandable language which would ensure a person with average literacy skills and experience would be able to understand the content, significance and import. The landlord needs to ensure the lease is provided in a language in which the tenant is fluent.
- The tenant’s attention needs to be drawn to any provision in the agreement that limits the risk of the landlord or constitutes an assumption of risk for the tenant.
- Contracts should not be excessively one-sided in favour of the landlord.
Signing a lease is one of the biggest steps you are going to take when setting up your restaurant but if you do your research and do not base your decisions on emotions then signing the lease will be another step towards the success of your establishment.