Talk to us about leases over a cup of coffee

This month, Scotland’s biggest coffee party is back: the Glasgow Coffee Festival. Coffee has been an essential offering of many licensed trade businesses for many years and in Scotland we certainly value our coffee.

We also love coffee at Gilson Gray and can’t wait to attend the festival. We’re looking forward to meeting with the licensed trade businesses who are attending. We are well aware of the sheer size and cost of having top quality coffee machines in licensed premises and of the difficulties of getting a return on that investment. The coffee industry has changed in recent years: the emergence of readily available specialty coffee from around the globe has resulted in this service offering becoming all the more viable.

But, as with any business, there needs to be a focus on quality of the coffee and the service. Focusing on the right things is only possible when other considerations are dealt with appropriately. The key to a successful business incorporating a full service coffee offering, is ensuring the legal considerations are dealt with professionally and meticulously.

Some readers may be property owners, therefore have tenants. Due diligence from the outset for all parties is key to ensuring focus remains on the successful running of the business. It is essential to know exactly who the landlord and tenant legal entities are. For example, is it a limited company, partnership, trusts or individuals? Many operators have separate limited companies for each restaurant. We also advise on structure and it is worth thinking about a separate limited company for the lease and the trading element of each premises. It gives absolute flexibility to the business - the structure of the business is really important and our team can advise.

There may be requirements to upkeep the energy performance of the building, asbestos management, electrical and fire safety or building insurance requirements. Where do these obligations lie throughout the term of the lease? It is really important all parties involved are clear on their obligations. It all starts with agreeing the Heads of Terms at the outset. This ensures the drafting of a detailed lease agreement is carried out as efficiently as possible. Pre agreed terms helps with that and avoids unnecessary time and cost.

Whether the operator is a new business taking on their first venture, or an experienced licensed trade business, contingencies are essential.

Break clauses are invaluable to tenants particularly if starting a new business, a new part of their business or opening a new site. It may be the area is right but the particular site is not and an operator can only find that out with trial and error. A break clause allows the operator to walk away from a site which is not working and relocate. Or consider different options. This avoids tenants being tied in for many years in an unknown site. No operator starts a business venture expecting it to fail so having this safety net can is necessary, as is and good planning and management.

The premises may require refurbishment to create the ideal environment for customers. Sometimes this means the lease is already in play before trading commences. In that case, a rent free period may be a good option giving the landlord security that a tenant is in place and will start paying rent but giving a tenant opportunity to get the premises fitted out and up and running so no rent is due before income is generated. Market rent in 2023 will differ from the market rent ten years earlier or later. Landlords do need to ensure their premises are generating rental income for years at a time and do not want to be renegotiating full leases every few years. Having a lease that accounts for this rent review provisions offer a solution. Having a fair rental figure throughout the entire lease term is important to allow for good relations between landlord and tenant.

Once the lease is in place, the fit out has been done, all of the surveys are complete, the business can start to trade which takes us back to the question of coffee!

The popularity of the annual Glasgow Coffee Festival is a clear sign that any licensed trade business should needs to think carefully about the type, style and quality of coffee they are offering. The coffee industry in Scotland is thriving and Gilson Gray can ensure that the legal considerations are dealt with expertly allowing for focus remain on the coffee.

For more information on leases please contact Mudassar Rafi on mrafi@gilsongray.co.uk or on 0141 433 7745. For structure, business and licensing advice please give Jo Millar a call on 0141 370 8116 or email her on jmillar@gilsongray.co.uk