In the previous post, we outlined the problems we are having enforcing a provision in our lease concerning the adequacy of the HVAC system. Temperatures are uncomfortable in dining areas and the lease warrants that the A/C is sufficient to operate a restaurant.
In many cases, large properties are managed by management companies who represent the actual owners of the property. While the management company handles routine maintenance and operation of the property, they do not sign or obligate the actual owner. Your lease is always between you and the owner to be enforceable.
The management company has an obligation to operate the property at the lowest possible cost to the owner. Most of the time they get a percentage of the rents and other fees to maintain the facility. However management companies don’t always act in the best long term interest of the owner. For instance, if they are notoriously poor managers with sloppy properties and inconsistent maintenance, tenants may move or prospective tenants may shy away from the property.
Restaurants should always copy correspondence directly to the owners when involved with problems the management company seems to ignore or refuse to handle. Many owners are totally unaware of what transpires between tenants and the property managers. If owners continue to have issues coming from tenants, you may find service improve through regular contact. Keep in mind, once you go around the management company, your relationship will be adversarial in the future. Sometimes you have to take action when it affects the comfort and expectations of your guests.
We have tried to keep you up to date of all the problems, plans and changes that occur when buying, owning or starting a new restaurant. One of the early posts included lease negotiations and the importance of getting verbal assurances and other matters in writing. We are now faced with enforcing a lease provision the landlord is tryng to avoid.
In our lease agreement we had a provision that called for the landlord to warrant that the exisiting air conditioning was sufficient to run a restaurant. At the time I was very suspicious that there was enough capacity from my experience in other operations. The landlord had an “expert” do an engineering report that said there was enough cooling. Experts and consultants for anything don’t run restaurants! We insisted that a provision be put in the lease regardless of the engineer’s report.
Since we built the restaurant in the fall, outside temperatures here in Florida were moderate. However, now that summer is in full force, temperatures are in the low 90’s outside. The summer heat, a full restaurant and doors opening and closing find us with 80 degree inside temperatures. Customers are uncomfortable in busy times and many have expressed their displeasure.
The landlord was notified of the problem in early June and has done little to address the situation. Little, that is, until we asked our attorney to pursue the matter and enforce the clause inserted in the lease. Now they have sent HVAC people out to make “minor adjustments”. Nothing has changed. This week we will probably have to file an action in civil court to enforce the lease provision. We will post the results and on going problem resolution.
As a side note, we also had a provision in the lease that says if there is a dispute between the landlord and the tenant that requires an attorney to become involved, the winner of the action pays for the attorney fees of the other party. We are confident the owner will need to pay our attorney and costs.
This week has been a lesson in patience and persistence that culminated in the signing of the lease for the new restaurant yesterday. To put the whole lease negotiation behind us is a relief, but not without some misgivings about the “recession” we appear to be in and the closing of thousands of restaurants across the country.
The doubts, fear of failure and even a “slick-willie” attempt by the landlord’s attorney to get a long term personal guaranty on the lease from me, all have to be put aside and concentrate on getting the construction done and the restaurant open.
The events this week that have occurred include;
- Received a quote on a hood system of almost $12,000. Need to get second quote. $2000 higher than expected.
- Bank account opened.
- Security deposit and first months rent paid at lease signing totalling over $8000.
- Architect complaining about how long it has taken to get lease signed and now he is very busy with another project. Falling on deaf ears as far as I am concerned!
- Son has numbers plugged into business plan and completing text.
- One contractor is out of town until Tuesday, but did send forms to landlord for a “Notice of Commencement”. This is a document filed with the county that puts everyone on notice that construction is starting and the contractors have lien rights until work is done and paid for. Common form necessary for permits.
- Scheduled meeting with another contractor due to the lack of communication from the original contractor. Need a “plan B” if I continue to have problems.
Next week’s goals are;
- Pull permits for demolition of existing walls, ceiling and materials.
- Check on condition of existing walk-in box at the location.
- Meet with contractor and architect to move project along.
- Start getting ideas on wall finishing.
- Watch for bargains on equipment and seating from closed restaurants.
- Get electric switched on at the location.
- Start working on marketing plan and creating “buzz” during construction.
With the economy deteriorating and consumer spending patterns shying away from restaurants, I will be looking at ways to preserve cash in the construction and pre-opening phase. While the plan is to build the restaurant from cash reserves, I must remember I have three restaurants to watch cash flow and be able to weather any drastic change in revenues.
