Putting money into rented buildings?

amn88

Guys sorry if this is a stupid query but I am in the process of starting my first 'proper' business. I am going renting a pub/nightclub (pls don't start telling me i'm mad to this, i've already made up mind) But what I want to ask is; I am taking it on a 2 year lease agreement with the right to renewal, I really think I 'll be there for at least 5 years hopefully, ideally i'd love to put 60k into the place, changing the buildings part of it. Say i want to build a new beer garden, put in dance floor new bars, lighting etc. I've gave the owner a brief on what i've planned and told her i'd be putting a lot of money into the buildings and paying her rent. 60k?? and what if i leave after 2 years? I'm sure lots of people do this, is my own loss if I leave after 2years after spending 60k on the place in a normal situation? The owner then said to me that she would put the 60k into the buildings and write it off over 5 years i.e. 12k a year so if i stay 2 years ill pay her 12k a year for the renovations = 24k plus the rent. So if i saty 5 years or more ill be paying her all 60k back.

I've a feeling this is not a normal agreement in a situation like this? What would usually happen in this situation? Appreciate ur help here, thanks

lion_bar

Can i get this straight?
If i've understood your post you've 2 options

Option 1 you pay for the refurb approx €60,000 up front and you pay rent to her

Option 2 owner pays for the refurb up front and you pay her €12,000 per year to cover the refurb cost plus you pay rent to her

Is that right?

bigneacy

amn88 wrote: »

Guys sorry if this is a stupid query but I am in the process of starting my first 'proper' business. I am going renting a pub/nightclub (pls don't start telling me i'm mad to this, i've already made up mind) But what I want to ask is; I am taking it on a 2 year lease agreement with the right to renewal, I really think I 'll be there for at least 5 years hopefully, ideally i'd love to put 60k into the place, changing the buildings part of it. Say i want to build a new beer garden, put in dance floor new bars, lighting etc. I've gave the owner a brief on what i've planned and told her i'd be putting a lot of money into the buildings and paying her rent. 60k?? and what if i leave after 2 years? I'm sure lots of people do this, is my own loss if I leave after 2years after spending 60k on the place in a normal situation? The owner then said to me that she would put the 60k into the buildings and write it off over 5 years i.e. 12k a year so if i stay 2 years ill pay her 12k a year for the renovations = 24k plus the rent. So if i saty 5 years or more ill be paying her all 60k back.

I've a feeling this is not a normal agreement in a situation like this? What would usually happen in this situation? Appreciate ur help here, thanks

lion_bar wrote: »

Can i get this straight?
If i've understood your post you've 2 options

Option 1 you pay for the refurb approx €60,000 up front and you pay rent to her

Option 2 owner pays for the refurb up front and you pay her €12,000 per year to cover the refurb cost plus you pay rent to her

Is that right?

Option 2 seems like a good idea. Will keep your opening costs down, and will spread the cost over 5 years, which would be an ideal option imho.

I wouldn't expect the owner to carry out this work for free and I actually think its quite decent of her to do it on your behalf, considering you're only tied to the business for 2 years.

amn88

Sorry guys, i should have being more clear. This was said to me by the owner casually trying to convince me to rent the buildings. I'm not sure the deal might be quite that when its comes to it.
But my question really is; what normally happens in these situations? You rent a premises for a year or two or maybe more but spend a fortune on THEIR buildings that will benefit them when they get it back, is this just your loss? if i cant get an agreement like i mentioned before.

buzz11

amn88 wrote: »

You rent a premises for a year or two or maybe more but spend a fortune on THEIR buildings that will benefit them when they get it back, is this just your loss?

Yes you are correct, this used to be the norm when there were plenty of tenants to rent premises.

However the scene is totally different now. You should be able to negotiate a deal whereby the landlord provides these improvements in return for your leasing the premises, however as you can imagine, the landlord will want you to sign up for a longer period. Therefore this is entirely negotiable and up to you to get the best for business.

I know of a city centre premises (not in dublin) where a large bar was idle for 5 years and the landlord completely renovated the premises for a really good tenant who signed a long term lease. It was a complete renovation, new floors, walls, toilets, wiring etc but tenant obviously had to get his own contents. In this situation the tenant had a very good track record in running pubs and had run several other successful premises, so it was worth the risk for the landlord.

I'm not sure the deal might be quite that when its comes to it.

Warning bells are ringing when you mentioned this....there is no room for "not sure" in these situations. Take detailed notes of what the landlord is promising and get your solicitor to include these in your lease agreement, so that if they are not provided then you can walk away.
You do have a solicitor?
Your solicitor will be drawing up the lease? or carefully checking the landlords proposed lease and adding extra items agreed?