When I was starting out, I wished there had been a blog I could read about what you needed to know about opening a shop. So I thought I would share with you what I have picked up along the way. Each experience (over the three shops) has been a bit different. Landlords are more or less flexible, terms are different and the state of the properties has been wildly different. So below I have shared some of the more important things I have learnt over the years. I hope any budding shop owners will find this helps!
When you take on a commercial property, you can negotiate the terms of the lease.
This can be the length of the term – anywhere from 1 year to 20+. I would expect a landlord to usually want a minimum of 3-5 years. For Clapham we had a 2 year lease and for old Islington we had a 3 year lease so we were lucky. Beware that if your lease is more than 10 years long you will need to pay stamp duty on that as well.
You will also be able to negotiate a rent-free period at the beginning of the lease – this is to help you get the shop ready before you open. I would ask for anywhere between 1-3 months. They usually only give 1 month but one landlord gave me a month one year and another the year after so that was great.
One of the reasons why it is a good idea to have a slightly longer lease is that the rent won’t be reviewed as early. So with a lease of say 10 year, they might agree to review the rent after 5 years but with a 2 year lease, if you decided to stay on, they will almost certainly review your rent before signing up for another term.
Business rates is like council tax for a commercial property but do not expect it to include rubbish collection! It basically doesn’t include anything like that. You have to arrange for waste collection separately and pay for it. The amount you pay for business rates depends on the rateable value of the property. This can be checked on the Valuation Office Agency (VOA) site here. Just be warned that rates do go up and I know plenty of business owners that have had to move because the rates have gone up, not the rent. It is one reason why it is worth considering being on a high street or not. Busy locations have higher rateable valuations so being a little bit off the main street can be a good idea if your shop is going to be a destination venue (see below).
Decide early on whether your shop is going to be a destination venue or not. So will people come to you for something specific and therefore be prepared to travel or does it need to rely on impulse/convenience shoppers. Sew Over It is a destination venue. Whilst it would be great to be in a very busy high street, it isn’t worth the extra rent. What we offer is relatively niche and our customers are prepared to travel (within reason) to get to us. So having good transport links is important but we don’t need it to be right in the busiest part of a shopping area. But if we were something like a cafe or gift shop that might be more important.
Commercial properties are divided into use classes. So a restaurant that prepares hot food needs to be in a property that has an A3 use, whereas a retail shop needs an A1 use. You can get the council to change the class but this can be a lengthly process and the outcome isn’t guaranteed. So ideally you want to be looking at places with the relevant class.
Unlike residential leases, you are responsible for the maintenance of the property. So if the electrics go or the sink leaks – you need to fix that. We have had to pay for countless issues over the years – broken boilers, rewiring electrics, fixing leaks – the list goes on. So it is important to make sure the property you are taking on is in a good state and that if it isn’t you have money in the pot to fix these things. It can add up! Some landlords will look after the shop frontage – so if the window gets smashed they will replace it, but not all of them. Make sure this is clearly stated in your lease.
You will need to find out whether you have to pay for just contents insurance (and public liability) or buildings insurance as well. Usually the latter is paid for by the landlord but some of this cost is passed on to you. So if they own the whole building then they will ask you to pay a percentage towards it. Just another cost to bear in mind!
When you move into property you can do whatever you want to it – basically anything that isn’t structural (although check first!). But you need to be aware that when you leave you will be expected to leave the property in the state you found it. When we moved out of old Islington we had to fully paint the interior, put in a new carpet and pay for the outside of the shop to be painted a more ‘neutral’ colour. It ended up costing thousands of £ that we didn’t expect to pay as when we took the property on it was in a bad state and it was so much better when we left. Take photos of the space when you move in and make sure this clause in the contract is really clear so you understand what is expected of you.
And finally, make sure you get your solicitor to check the lease before you sign it. It costs money but it is worth it. They will notice things you won’t and will make sure your best interests are protected and there are no nasty surprises!