Beauty Salon Lease Agreements: The Comprehensive Guide

What’s a Beauty Salon Lease Agreement?

A beauty salon lease agreement is a legally binding document between a salon owner or tenant and the property owner or landlord. Typically, the purpose of this agreement is to grant the salon owner the right to occupy and operate their business within the given space, in exchange for an agreed rent amount. Note that both landlords and tenants are able to negotiate terms and conditions into the agreement . Signing the lease is a binding agreement. The parties involved in commercial real estate leases can vary, but for salon owners and their tenants, they are typically the landlord and the business owner or tenant. These commercial real estate leases can be used in both standalone, freestanding locations as well as those in a multi-tenant building, such as a mall.

Components of a Salon Lease

The fundamental components of any commercial lease are present in a beauty salon lease. But more details can make for a more salon-specific lease agreement. As is true in any commercial real estate transaction, the parties to a beauty salon lease should be sure to define their respective duties in the lease, and not assume that more is implied than is expressly stated in the lease agreement. The following are examples of core elements of a beauty salon lease:
Type of Lease – whether the lease is a triple net lease (sometimes within a percentage lease) or standard non-pass-through, and whether the lessor will provide any operational services or equipment.
Rental Term – typically 3-5 years.
Rental Rate/Payment – monthly rent amount, late fees, overage charges, tax payments, and operating expenses. If the lease is a triple net lease, all of the above must be broken down into items such as the tenant’s share of property taxes and insurance through an adjustable gross-up factor.
Renewal – rights to renew, notice periods, and payment of market value.
Improvements – Tenant’s ability to make property improvements, permitted types of improvements, and property management’s right of approval.
Maintenance and Repairs – Landlord’s and Tenant’s responsibilities for building maintenance, including repairs of H.V.A.C. equipment, plumbing, electrical systems, and furniture, fixtures, and equipment. Also, what happens with respect to damage caused by casualty and force majeure events.
Signage – size, placement, and approval for signs and other advertising.
Access Rights – hours of access by either party, access by delivery/service personnel, and janitorial services.
Utilities – utilities to be provided in the property including fiber optics cable, internet, and telephone services.
Terms of Use – permitted uses of the leased property.

Common Terms in Salon Leases

When entering into a lease, there are a number of provisions that are commonly included within the lease. The list below highlights some of these clauses.
Exclusivity Rights:
Many landlords will provide exclusivity rights in their leases that provide an offer to take an additional lease if another space or unit in the shopping centre becomes available. This can be most commonly found for larger or flagship tenants or tenants that are providing a new type of use to the centre. An example of an additional space could be a space that is in the process of being vacated by a former tenant. If you are a shopping centre tenant, asking for an exclusivity clause can help ensure that you have a right to run your "flagship" brand but if you are a landlord, you will want to ensure that the exclusivity right is appropriately limited by both a scope and a timetable so that your ability to lease vacant or impending vacant space is not constrained for an extended period of time.
Permitted Uses:
The use clause within a lease outlines the uses that are permitted at the premises. This clause is important for both landlords and tenants as it will dictate in part what businesses can operate from a particular space and what businesses cannot. A landlord will want to ensure that the use clause does not overlap with services or amenities provided to tenants in the centre and therefore prevent a tenant from competing with other tenants in the centre.
Alterations:
The alterations clause in a lease will dictate whether a landlord or tenant is responsible for alterations to the premises and under what circumstances approval may be required. Typically, the landlord will be responsible for more substantial alterations at the centre as a whole (i.e. adding or removing amenities such as restrooms, parking areas or landscaping) and the tenant will be responsible for alterations within the unit itself (i.e. installing plumbing, flooring, millwork, lighting, cabinetry, etc.). From a landlord’s perspective, it is important that the alterations clause is limited to only what is absolutely required to maintain the overall aesthetic of the centre. Common additional terms in the context of alterations are provisions that will require consent by the landlord before any alterations can be made by the tenant. In addition, if a tenant wishes to install plumbing or other structural items in the centre, a landlord may wish to include additional provisions that will restrict the tenant’s ability to remove perforations upon the expiry of the lease and require the tenant to return the premises to its original condition.
Although there are additional clauses that a landlord may wish to add to its leasing package, the three clauses highlighted above are some of the most commonly requested by landlords to be included as a matter of right within their standard leasing package.

Salon Lease Negotiations

As with any negotiation process, there are various strategies owners can use to their advantage. In this case, however, we strongly advise acting in good faith and only using ethical tactics. A typical and successful approach is to seek negotiation when the market is slow for area landlords and they may be less rigid than they would be in high-demand periods. It is also important to consider the equal bargaining power of both parties; after all, landlords need tenants just as tenants need landlords. If you make a fair initial offer, you should be prepared to hear counter-offers and be willing negotiate until you both reach a reasonable compromise. Facts from the market can help your position, such as neighborhood property sales, trending or stagnant trends in rental properties and the fundamentals of your demographic, region, population age, and market saturation. You can also ask the broker to provide similar area examples for guidance and leverage and potentially to present your offer to the landlord. If you make an offer that is lower than what you expect to pay, be forthright with the broker about your reasons for a low offer. For example, if the location is in an area with lower income demographics, tell your broker that you believe that residents may not frequent your business often enough to sustain a higher rental. Similarly, if the location is in a new building development with few or no existing similar businesses, you may believe there is not enough market saturation to support several similar types of businesses equally. Try to offer complete, unambiguous offers when negotiating rental terms. A vague proposal, where insider knowledge from the broker or the real estate agent is required, could leave you at a disadvantage. Although landlords need to meet an occupancy target by a certain date, if the offer does not contemplate an occupancy delay, they will not likely respond favorably to financing delays. You should also take into account anticipated rental increases over the full term of the lease. Most leases contain terms of up to ten years. If you offer a rental increase of just 2 percent annual, that is relatively modest, meaning that it may be accepted fairly easily. However, a 20 percent increase over ten years, would amount to a 2 percent increase per year, and is unlikely to be accepted in the current environment.

Salon Leases: Legal Issues and Considerations

Legal pitfalls are common when a salon lease agreement is presented to you. To avoid them, it is highly recommended that you choose a lawyer who has specific expertise in salon leases or hairstylist contracts (most hair stylists get a contract rather than a lease due to the nature of their business). Contracts which do not spell out every detail can be problematic over time; things which are common sense to you or to your old salon may lead to misunderstandings with a new landlord.
It is not only the salon lease agreement which can be problematic, but also the language attorney professionals use in these. Some lawyers may try to get away with using their basic contracts with the hairstylist’s name inserted into the blank spaces – which is lazy on their part. No hairstylist should ever use the same lease agreement that was made by or for someone else – it can lead to confusion and loss of money later on. Above all, every salon lease agreement should have discussed every important detail in writing .
Even if both parties sign a contract, this doesn’t stop there. A hairstylist’s contract or salon lease agreement can include loopholes which allow them to break the contract at any time they choose. These loopholes even include language which gives the complex landlord the ability to terminate a contract whenever it is convenient for them, regardless of how long the hairstylist has been working at the location.
If you don’t have an attorney, be sure to read every line of your contract yourself to try to find loopholes like this – you might be surprised. If you have an attorney, be sure to make sure that they are looking for any loopholes, as that is there job. If you are not able to understand what a contract means even after having an attorney read it, then it is likely that you should not sign it. Finding loopholes not only leads to even more contract confusion, but it tells the court system that you were not being honest.

How to Break a Lease Early

There are a number of circumstances that may enable you to terminate a beauty salon lease early. Absent a specific acknowledgement of the fact and extent of pre-termination notice and damages in the lease, the obligation not to disturb the tenant’s possession will be strictly enforced by the courts. If the tenant at the time a notice is given to terminate has the opportunity to remedy a situation, the court may rule that the tenant was not in breach and that the premature termination has caused the tenant damage. The court would require sufficient advance notice to be provided and determine that the lessee has the opportunity to remedy the situation.
For example, if the beauty salon lease provides that the tenant has to maintain the premises, the landlord must provide advance notice of its intent to terminate the lease as a result of any violation. It must be sufficient to provide the tenant with an opportunity to remedy the situation. Especially in New York, there are many situations where the scope of what constitutes reasonable notice will be greatly impacted by the circumstances surrounding the violation.
In New York, for residential tenancies, a written notice must be given at least 30 days prior to the expiration of the time period during which a certain lease provision must be met. In commercial leases, such a period of 30 days is set forth in the lease itself. If neither party specifies the frequency of inspections or the language for notice, the court will define it by what is deemed reasonable in the circumstances.
Often landlords are in a position to decide whether they would like to terminate the lease as a result of a tenant’s default. To the extent possible, this is the preferable termination method, although it is always prudent to provide the tenant with reasonable time to remedy the situation. If a tenant breaches a contract and the landlord wishes to terminate the contract, the landlord may do so. However, the court will only permit the landlord to recover whatever damages are proper.
A lease generally does not create a joint interest with respect to the property itself. As a result, if the tenant abandons the property, the landlord has the right, under the law, to rent the property and charge the original tenant for any loss. The tenant is responsible for rent until the landlord gets a new tenant. If the tenant is deprived of possession by the landlord, the landlord loses his right of rent. The landlord must simply provide the tenant with reasonable notice that he is occupying the facility with another tenant.
If the tenant is able to prove that the landlord commits fraud or misrepresentation, the court may grant equitable relief and return the tenant’s security deposit. The court may even award the tenant damages for the landlord’s fraud.

Revising Your Lease Agreement for Your Salon

Adapting Beauty Salon Lease Agreements for the Future
Future business growth must be considered early on in the salon lease agreement process, preferably well before a commercial lease is drafted. Many salon owners delay making a decision about a lease until the last moment, but this approach could curtail business expansion, or worse still, lead to an expensive, unwanted, and unnecessary lease termination.
Space is often at a premium in major cities, and where commercial real estate prices are high. When planning the salon space, the owner must think carefully about the location, because space can be hard to come by. Moreover, sometimes a specific location can help a business grow, particularly in the beauty industry where some customers are frequent travellers. This ‘mobility’ is something that’s been noted by Uber drivers, in an article by Influicity. For salons, it’s good to think about how many services you offer, and whether you might offer more by using a service like UberElectric or something else entirely to fit a different type of clientele.
Further detail must be considered when discussing the salon layout. How many stylists do you plan to employ? Is there sufficient room for a nail technician, or perhaps space for a beautician? How will the salon layout help with customer service – will you be able to give repeat customers the same stylist each time they visit? Will you have a private area for beauty treatments? Is there staff room for all the employees and comfort facilities for employees and clients?
In terms of salon position, rent is typically a major factor, as you would expect. You also need to consider whether the premises comply with local authority requirements. Further issues include whether the premises would need to be modified to accommodate your salon, and whether any alterations would be allowed . Some landlords might want a stake in the salon’s success, e.g., through a percentage rent that might be more in line with seasonal business fluctuations that some beauty businesses see, especially during holiday times and major events when people indulge in more pampering.
Expanding a salon to more than one location is feasible for a beauty business. A landlord who intends to remain in business for the long haul, can make small changes to the lease so that their premises can scale up and down. A clause can be added, for instance, so that the salon has the option to take on more employees without facing the threat of eviction. Or an expansion clause can be included to bring in more hair stylists/nail technicians/beauticians, thereby expanding the salon’s services; this can be defined as more than one hair stylist for a period over a certain number of months.
Another option is to allow the commercial property owner to put in the beauty salon installer’s specifications (which must be properly planned), so that if the salon simply outgrows a space, the property owner can extend upon the original premises at minimal cost to both parties.
The most common lease agreements for beauty salons are retail leases, which are not flexible enough for expansion or growth; an end of lease option will be needed for growth opportunities. There must be a way of bringing in extra services and employees without incurring extra costs, or losing the commercial property altogether.
Scalability should also be built into the commercial lease document if a hair salon is relocating, leaving behind a salon in order to move to new, bigger premises; or if the owner is splitting two businesses to widen their customer base. In these cases, it might be that one lease agreement can be used to cover the two separate businesses until conditions change and the businesses have established themselves in the market.