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Thread: Can you afford to lose?

  1. #1
    Owner Kim Howells's Avatar
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    Jan 2013
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    Perth, Australia
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    Can you afford to lose?

    I recall being asked this question regarding taking out a lease extension.

    I didn't know what the adviser meant at the time but have never forgotten his words.

    If you decide to say extend another 5 years on your lease, on one hand you could say you have some kind of ‘security’ but on the other it’s a dangerous game.

    It’s the double edged sword I am talking about.
    Example

    Your monthly rent is $10,000 and you are in a shopping center. You extend for 5 years for whatever your reasons are, by doing that you will probably have to do a refit of kinds. Which will be more expense.

    That means your current liability towards the Body Corporate in the Shopping Center is $600,000!

    Can you afford to lose this amount, if not then consider very carefully your options?

    Renegotiate your lease would be a sensible route to take.

    Do you really need that kind of exposure?

    Have you considered if things go badly you may lose your home?

    Over the last 5 years or so there has been a considerable shift in high rents way out of proportion and in particular these are in Shopping Centers. The Giants like West-field and Centro to name but a few.

    They are more and more relentlessly aggressive in putting up rents regardless of what is fair and reasonable in my humble opinion.

    They are not relay interested if you can afford to pay this, as long as you have agreed to pay this that is all they are concerned about.

    If for some reason you decide to extend your lease then you should re-negotiate down your rental cost, but what is happening countrywide is that the Body Corporate are re-negotiated up the rents.

    It is making it impossible for you to make a profit.

    If you decide to sell and your turnover is not matching the high rent then basically you will have a ‘blighted shop’.

    The only way out of the lease is to sell for a nominal figure just to get someone else to buy into the lease or crash the lease.


    You should be talking to your accountant with these issues or adviser before making any decisions.

    Has anyone been having problems paying their rent and how have the Body Corporate dealt with this issue?
    Owner of ExpertSalonMarketing.com

  2. #2
    Administrator
    Join Date
    Aug 2012
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    I totally agree with what you have written Kim. I know several hair and beauty salons not in centres but in main street, where the owner is mercilessly putting up rents, HOWEVER, is doing no repairs to the building.

    All Salons should know what is in their lease, and who covers what for repairs.

    I urge All Salon owners to take out your lease today and make sure you understand, who is responsible for what, and where you stand with rent rises after your lease runs out.

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