Am i paying too much rent?

[Evietoat93]

Hi im a first time business owner of a cafe. I've had the place for about 9 months now and completely renovated the place spending about £15,000. The unit is approx 90sq/m floor space with a max of 40 people capacity. It is quite long and narrow. We're paying £2000 per month rent.

I've recently found out that our neighbouring food businesses on the highstreet are paying a lot less in rent than us, with next door for example with a 70sq/m for space paying £800.

How do i find out the true value of what i should be paying?

 

[WaveJumper]

How long is the term on your lease

 

[BizziBee]

Sounds like a lot. Maybe go knocking on your neighbours doors asking them what they're paying?

 

[Mr D]

What you should be paying is what you agreed.
However what someone else pays for similar size premises with same facilities is presumably what they agreed.
Some leases have limits in how much the landlord can increase the rent. They get a new tenant or do a new contract after tenancy expires the rent can go up (or down) considerably.

 

[WaveJumper]

The bottom line is the rent can depend on many factors, obviously location, size, type of lease is it short / long term / temp and of course the landlord will normally be very well versed in what the local rental market values are. Hopefully you took proper legal advice before signing your lease and this would have been the time to have done your research and then negotiated your deal. Did you ask for a rent-free period, contribution to fit out costs or take the lease over from someone else. However as @Mr D indicated you are where you are

 

[japancool]

How do i find out the true value of what i should be paying?

The true value is what someone is prepared to pay for it.

 

[Mark T Jones]

OK, it's my turn to say it - what did your lawyer say before you signed the contract?

As above, nobody can answer that question without a lit more information but since you appear to have chosen to commit yo that sum, you really need to focus on running the business

 

[Evietoat93]

How long is the term on your lease

5 years with an 18 month break clause

 

[Evietoat93]

Sounds like a lot. Maybe go knocking on your neighbours doors asking them what they're paying?

I've asked a few and they all seem to be paying significantly lower, between 800 and 1200

 

[Evietoat93]

OK, it's my turn to say it - what did your lawyer say before you signed the contract?

As above, nobody can answer that question without a lit more information but since you appear to have chosen to commit yo that sum, you really need to focus on running the business

Yes s I realise I've committed to a contract but is there notjong i can do to renegotiate based on the comparative market?

Does anyone how to get a valuation on rent and the business?

 

[DWS]

Surely if you signed the contract then you were happy to pay what was stated, just because others are paying less is not the landlords problem, you should have done the research before signing the lease.

 

[Evietoat93]

Surely if you signed the contract then you were happy to pay what was stated, just because others are paying less is not the landlords problem, you should have done the research before signing the lease.

Yes thanks for that insightful comment

 

[WaveJumper]

Unfortunately the bottom line is you can get as many valuations as you like now but the landlord I am afraid is not going to renegotiate your lease

 

[Evietoat93]

Unfortunately the bottom line is you can get as many valuations as you like now but the landlord I am afraid is not going to renegotiate your lease

Then i will either sell the business or break the lease at the 18 month break clause

 

[Mark T Jones]

Yes s I realise I've committed to a contract but is there notjong i can do to renegotiate based on the comparative market?

Does anyone how to get a valuation on rent and the business?

As the saying goes, there is no harm I asking

It depends largely on who the landlord is but bottom line, if you agreed a price and contract, would you be happy to renegotiate?

 

[WaveJumper]

If you don’t manage to sell the business before the break once you have served your intention to break and go that’s the time you could possibly negotiate with the landlord, you maybe be lucky.

Just make sure you check your lease reference notice periods and don’t miss any deadlines

 

[roydmoorian]

Could be that other tenants are nearing the ends of their leases and looking at increases going forward.
What happens to the £15k you have already spent on the premises if you leave.
Is the business making a profit at present rate of rent or would reduction make it profitable?

 

[Financial-Modeller]

Are the terms of your neighbour's lease - with the exception of current rent - identical to yours?

 

[Sofia Schulz]

Hi, I think that the amount of a rent change a lot depending on the city/town you are paying the rent, and also on the area your café is

 

[Chris Ashdown]

Its up to each landlord to set there own rent, nothing to do with what the others charge, if they think a busy Café is worth more than a fashion shop or toy shop that's up to them. You thought it was worth the money you agreed and since then invested into the business.
If you take up the option , the next person may get it at up to say £10,000 less or maybe £10,000 more than you pay , just depends on how desperate the landlord is to get it rented

 

[NickGrogan]

Can I come to your cafe, have coffee and cake and then get you to price match the cheapest I can find?

Or do you expect me to check the prices before I order and then pay what's due?

 

[Paul Norman]

You might be. You might not be.

I would rephrase the question. Do you want to pay less rent? And do you feel that you might succeed in getting a reduction?

You should, as a matter of routine, inform the landlord in writing that you wish to take the break clause at 18 months. There will be a time limit on when you can do that. That will open up a conversation that might go your way, or might not.

If the business can pay that rent and still be profitable, then I would not be too worried about it.

 

[JEREMY HAWKE]

Can I come to your cafe, have coffee and cake and then get you to price match the cheapest I can find?

Or do you expect me to check the prices before I order and then pay what's due?

Good start up idea Nick
Im going to call my new cafe " Barter Buns" cant wait to see you

 

[NickGrogan]

Good start up idea Nick
Im going to call my new cafe " Barter Buns" cant wait to see you

Do you deliver?

Some devon scones sound good.

 

[Washington]

5 years with an 18 month break clause

You haven't said if the business is profitable at a level you are comfortable with.
Whilst nobody wants to overpay on the rent, it was clearly a figure you were happy with when signing, to the extent you spent an additional further £15k on it

If you are not making money, perhaps you should engage with the landlord and let him know you are considering exercising the break clause option as the business is not making money as you need it to. Also maybe let him know what the other rents are on the street and ask if there is anything that could be done to make the rent more realistic. Landlords are unlikely to reduce a contracted rent, but you never know...in the post Covid world there may be more vacant units around, and the landlord may be happier with a tenant in place rather than looking to find another

How much of the £15K worth of 'fit out' is removable ? I assume if you have spent that much money on a unit less than 1,000 sq ft, it will look pretty good. If you can't take it out, are you better persevering with the business rather than taking another unit in the area, as to move and start again could mean a lot of upheaval and lost turnover....plus you may be leaving the unit with fittings in where someone could compete with you

 

[Richard Cole]

Until the breakclause or the end of the lease you will basically have to accept the rent you are paying. It will also depend on the type of lease you have and does it allow you to renew, if it does In the year before the end of your lease you need to start planning and find a chartered surveyor who specialises in commercial property / rent reviews, look for recommendations from your community. Once you enter the last 12 months you can issue a Section 26 notice setting out your intentions to renew the lease, what rent you are prepared to pay etc. this is the time you can negotiate, if you fail to reach an agreement you can then let a court decide the rent based on the market value in your local, this is where you need your Chartered Suveyor to have done the ground work and gone round all the other businesses and gained proof of rent, size of shop etc for neighbouring businesses. You will also need a solicitor who specialises in commercial propetry transactions. The other option is to look to re-locate in the next 18 months and find another site nearby on a cheaper rent and inform your landlord that you believe you are paying to much rent, have proof from your chartered surveyor and say you will be looking to trigger the break clause unless the landlord agrees to re negotiate the rent, they may well do if they are faced with an empty shop, especially in the present climate, if your landlord does not go for it then trigger the break clause and move to a cheaper site. If you do trigger the break clause make sure you have complied with any terms of your lease or you might find the break clause fails. A break clause usually will have to be triggered some months before the actual date and you will need a solicitor to do it for you. Hope this helps, I am in the process of renewing my own shop lease.