Hotel Lease Agreement

Starting a hotel business can be a very exciting venture. However, with the economic climate being so unsettled, you really need to go into this enterprise with your eyes wide open. An operator of the hotel will often take long-term (20-year plus) full repairing and insurance leases, with index-linked rental uplifts, providing a stable and inflation hedged income for the landlord. This protects investors from a decrease in the real value of money and prevents landlords from having to fill the rooms themselves or take any operational risk. In this article, hotel lease agreement, we will look at the process involved.

Free Initial Telephone Discussion

For a free initial discussion on how we can help you with your hotel lease agreement, get in touch with us today. We will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help you avoid making mistakes, saving you money and also avoiding the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.

Before you sign anything, check the property carefully

Before signing the lease, it is a good idea to check the property carefully both inside and out. Look for any obvious defects and signs of damage or neglect such as damp, problems with the guttering, rotten windows, leaking taps, flaking plaster or cracks to the walls and ceilings

If you spot any existing damage, take a photographic record of it so that you won’t run the risk of being accused of causing the damage, should you vacate the property.

Generally, any repairs the property may require should be made well before you move in and prior to signing the lease.

If the property requires some upgrades after you move into the property, then make sure this is fully detailed in the lease, along with completion dates.

If you had to close your business due to unfulfilled repairs not being made on time, this could potentially be very costly to you.

What are the key points of the lease?

There are a number of key points to consider in a hotel  lease and these can include:

1. How long is the lease term. Try and avoid lengthy leases that don’t contain break clauses.
2. How much is the deposit and will it be refundable. Also, will you be liable for decorating the property when you vacate?
3. How much and what is the frequency of the rent and does it include anything.
4. When is the rent due and how can it be paid (e.g. postal address or in person) and are there any late fees (how much and when are they incurred)
5. What insurance are you required to have at the lease signing and for the duration of the lease?
6. Unless your lease specifically states that you can sublease or share the space with another business, assume you cannot. If you require a sublet it must be clarified in your lease, giving you the right to do this.
7. How much will your rent increase if you choose to renew and will you be required to sign another lease for a certain period of time?
8. If you plan to do any repairs or upgrades to the property make sure it’s clearly stated in the lease. Some landlords will give you credit for such work made, but this work must be approved beforehand. Some landlords will not let you do any work on the property unless you use the landlord’s contractors of choice.

It is vital that anything you agree with the landlord is formally written into the lease. You don’t want to find yourself arguing over something that was agreed upon but isn’t recorded in writing.

Lease Structure

Under a hotel lease structure, the hotel operator will hold the entire financial burden. The tenant (hotel operator) will assume all operating responsibilities along with all the financial obligations. In this way, it will enjoy the benefits of success but also bear the loses if things don’t turn out as well as hoped for. The operator receives all of the profits after rents have been paid There are a number of rental structures that can be used and these include:

• Share of revenue. In this instance, rent is calculated on the amount of sales that are generated and the owner of the property shares some of the risk associated with the level of performance of the hotel.
• Fixed Fee. This form of lease structure offers a guaranteed return to the property owner and offers the most security of revenue.
• Share of Net Operating Income. This scenario carries the highest risk to the owner of the property as it includes the operating risk of running the hotel and offers little transparency with regards to likely income.

How we can help

We have a proven track-record of helping clients negotiate hotel  leases of all sizes. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner and support and advise you with all the negotiations. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact our Commercial Property Solicitors

It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.

To speak to our Commercial Property solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online contact form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Commercial Property, News Tagged as