Understand The Lease Before You Sign

By Vicki Vaughan San Antonio Express-News.

SAN ANTONIO

After explaining to entrepreneurs the pitfalls of renting storefront space, real estate broker Ken Martinez said, "Have I scared you?"

There's plenty to consider when renting, and making a wrong move when signing a lease can hobble a business for years, Martinez and banker Dahlia Garcia said at a workshop for those interested in moving from a home-based business to a storefront.

The Accion Women's Business Center sponsored the seminar at Café Commerce at the Central Library, 600 Soledad St.

For owners ready to make a move, they must have a clear understanding of what they need and what they can afford to pay, said Martinez, of Great Metro Realty.

He suggested contacting a real estate broker who knows the market. "Get somebody to help you," he said, "and be as specific as you can. Sometimes someone looking for a property says, 'Oh, I'm not picky.' That doesn't help the broker find the type of property that's needed."

The next concern when storefront hunting is learning how it's zoned, he said. "There are designations that might hurt or hinder you," Martinez said. For example, if a lot is zoned "NA," or non-alcoholic, "you're not going to be able to put a bar there."

In some instances, especially for a larger business, it may be worthwhile to try to get a property rezoned.

Whatever an entrepreneur's needs, "you need to check everything out before you sign a lease," Martinez said. "Once you sign, you're committed."

He cited a client who bought a site for a restaurant on Loop 1604 near the University of Texas at San Antonio.

After the client bought the property, he learned that the city wouldn't allow access from Loop 1604. Instead, customers will have to enter from side streets.

The site "is going to work," Martinez said, "but sometimes it's not as simple as you want."

Also, a business owner needs to understand what type of lease he or she is signing.

"There are different types of leases. Understand it so you won't get surprised later," Martinez said. Typically, a lessee won't be responsible for paying for air-conditioning repair or roof repair. "But check the lease -- maybe you will be."

Garcia, vice president of small-business development at Crockett National Bank, said hiring a broker could save business owners money and prevent them from signing an unfavorable lease.

She cited the case of a business owner who signed a 10-year lease -- then the air-conditioning broke. The owner didn't know that her lease required her to pay for the costly repair. "She wanted to move out, but she couldn't," Garcia said, and paying for the repair continues to soak up much of her profit.

In another case, Garcia referred an insurance agent to a broker to help him negotiate a lease. He told her that hiring the broker cut $1,000 a month off the cost of the lease.

"Hire somebody who'll be on your side," she said.

Leases in strip centers are typically called "triple net leases," Martinez said, which means the landlord will pass on the expense of maintaining the real estate to the lessee. That includes paying taxes, insurance, maintenance and a property manager, and maintaining the parking lot.

Although some aspects of a lease may be negotiable, at present landlords enjoy a strong market and so there's little incentive for them to negotiate, he said.

Laura Garza attended the workshop to help gather information for her nephew, who couldn't attend but who is considering opening his own business.

She thought the seminar "provided a lot of information on leases that I was not aware of," and she said Martinez and Garcia presented the information in a way that will make it easy for her to relay advice to her nephew.

"I think this is an excellent resource for all new small-business owners to gather the information they need for starting up," she said.

Cris R. Garza, owner of Garza Marketing, which does marketing and business consulting for small businesses, said he would have liked to have more basic information about doing a property search.

"I'm looking for something that I can afford that's going to be appealing," Garza said. "That's a big order to fill."

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