In acquiring a coin laundry business, most buyers
focus on (1) location, (2) the historical and projected income and
expense picture of the business, and (3) the remaining term of the
lease to be assumed. It is my experience that most purchasers don’t
spend much time reading the fine print of a lease. I am frequently
told that since the lease was a printed form and it was entitled "Standard
Lease," it must contain "standard" provisions that
everyone accepts in the industry.
Tenants generally do not gather together and form an association for
the purpose of preparing and printing a "Standard Lease".
Landlords, on the other hand, frequently do. As a result, the Standard
Lease regarding your business location has probably been prepared
by an association funded by landlords. Business leases are thus generally
slanted toward the concerns of landlords rather than tenants. Notwithstanding
the fact that the lease is a printed form, many of the provisions
may be subject to negotiation since the landlord wants your money
as much as you want his location.
Everyone always enters into a lease with the expectation that the
other side will perform. What if it doesn't work out that way? What
if the tenant encounters difficulty in the payment of rent and the
lease contains some type of late charge? What if the late charge turns
out to be a substantial penalty that could have been avoided if discussed
with the landlord prior to signing the lease?
Another common problem that might be addressed during lease negotiations
is the concept of tenant or employee parking within the shopping center
parking area. The idea of having a fast-food outlet within the shopping
center near your laundromat may initially seem appealing; however,
if delivery service vehicles monopolize the parking spaces, your customers
may look for another nearby laundromat.
Do the common area maintenance expenses to which you contribute a
proportionate share include administrative fees or management fees?
Some of these fees are entirely legitimate and are incurred by lessors
who employ secretarial and bookkeeping services, or a property manager.
Other lessors, however, do little in the way of administration, but
nonetheless impose substantial administrative fees upon their tenants.
Look further under the lease. You will see phrases such as "Operating
Expenses" or "Maintenance, Repairs, Alterations and Common
Area Services", or "Liability Insurance - Lessee",
or "Property Insurance" or "Real Property Taxes".
A number of words will follow each one of these phrases, defining
what is meant, but not setting forth a specific dollar amount. If
you want to understand the nature of each one of these charges or
potential charges, you need to ask questions of your lessor, before
you sign the lease. If you don't understand the phraseology of the
lease, you need to retain an attorney to assist you, so that he can
explain the terms of the lease to you and ask the proper questions
on your behalf.
When considering the acquisition of a laundromat, have you examined
the utility bills? Sewer usage charges are imposed in the City of
Los Angeles through statements rendered by the Department of Water
and Power. Other locations, operating through independent water companies,
may or may not incur sewer usage charges through a water bill. In
some situations, sewer usage charges are to be found under the property
tax bill.
Lessors who discover water sewer usage charges imposed upon their
real property tax bill will customarily be careful to set forth the
lessee's obligation in this regard under the lease. Lessors will,
as a matter of cautionary excess, pass along as a charge to the lessee
any obligation which vaguely touches upon the subject of water. One
lessor, for example, placed the following language in his lease which
was lifted directly out of his real property tax bill: "Lessee
shall be responsible for the cost of all water used on the Premises,
including, but not limited to, any changes by governmental authorities,
including, but not limited to, any sewer usage charge, mosquito abatement
fee, water stand-by charge, flood control charge and similar type
charges which appear on the Joint Consolidated Annual Tax Bill for
the Premises."
The only way to properly protect yourself is to carefully read and
understand your lease, preferably with the aid of an attorney, before
you take pen in hand. After the signature ink has dried, your negotiating
leverage will also have dried up!
[This column is intended to provide general information only and
is not intended to provide specific legal advice; if you have a
specific question regarding the law, you should contact an
attorney of your choice. Suggestions for topics to be discussed
in this column are welcome.]
Reprinted from New Era Magazine
Myles M. Mattenson © 2000-2002
