What is a predatory lease and how do you know whether you have one or not?
There are four elements commonly found in what the GSR calls predatory leases for small businesses coming into Lake Geneva. The four predatory clauses that people signing leases ought to be on the lookout for are:
- The damage section of these leases can be used to immediately and without notice cancel the lease. Read your lease very carefully when it comes to who makes the decision about whether the building space is too damaged for you to continue in business, and therefore have 30 days or less to vacate. One such damage clause was invoked for a cracked front window!
- Owner entry. This provision of some leases lets the owner and agents of the owner to enter the business whenever they feel like it, to do whatever they want. Make certain this clause in your lease stipulates in detail under what conditions an owner or agents may enter and what notice must be given before entry. Lessees in Wisconsin are entitled to their own locks and keys. Use that allowance.
- Repair, replace or maintain provision. Watch this one. By signing a predatory lease, you may be on the hook for improvements to the owner’s property that you may have no share in, and may not be able to determine the limit of. The Green-Eyed Lady’s heater on Cook Street was going to be over seven thousand dollars. What shop owner can pay that on top of rent in the winter months?
- Legal fees. Commonly, in these predatory leases, the leasing business is required to pay everyone’s attorney costs no matter who files suit against whom, and for what. Make sure you only have to pay your own legal fees, no matter what.
Finally, watch out for these fifteen page leases with all the fine print. You should sign a lease for your small business that is no more than four or five pages long, if that. Eighty percent of small business that start out fail within 18 months (Bloomberg). Your business property owner knows this number. And your business owner has been to this rodeo many times before.
A Grand Person Living Here