Ask a Lawyer: The Top 3 Lease Issues for Gym Owners

Matthew Becker - Ask a Gym Lawyer

Mike Warkentin: 0:01
Ever wish you could ask a lawyer for some advice about your gym? If so, keep listening to Two-Brain Radio and be sure to subscribe for more shows just like this. In September, 2021, I found out a gym owner who appeared on the show was also a lawyer fast forward and Matthew Becker of Industrial athletics has launched Gym Lawyers dot-com to help fitness entrepreneurs navigate the legal world. Now he’s not one of those out-of-touch lawyers who doesn’t understand your gym . He’s one of us. We accept him! Gooble-gobble, we accept him! Today. He’s gonna offer some insight on common legal issues gym owners face. I’m Mike Warkentin. Matthew, I have questions for you. The first one: You’ve been called to the bar. Are you ready for a barbell exam?

Matthew Becker: 0:45
Good morning, Mike. Yes , I’m ready for the barbell exam .

Mike Warkentin: 0:49
Good . I use that joke on every lawyer I’ve ever trained at my gym, and it never gets old. At least for me.

Matthew Becker: 0:57
When I was in law school, we always had, there was a T-shirt that said something about “I graduated law school and passed every bar on the way,” like , you know , an alley of all the bars in town.

Mike Warkentin: 1:10
I’m sure I understand exactly how that goes. So I’m thinking of this one lawyer, I always made that joke to him and he always laughed for me, which I appreciated. So let’s talk, lease issues. This is a big deal. Lease issues are a huge deal for gym owners. I’ll give you a very quick story: I didn’t wanna pay a lawyer to review the lease that was supplied by my landlord’s agent. Thought it was a waste of money, but I had it done anyway. That expense paid off big time down the line when things she changed in the lease that was supplied to me saved me a ton of money. So, Matthew , what are some of the most common issues gym owners miss that are in leases that aren’t reviewed by an attorney? And we’re talking like the top three. What are the big ones here?

Matthew Becker: 1:49
Yeah, I’ll go top three, but I will say for your future interactions with attorneys, being limited on “only give me three” is terrible. We hate to be limited.

Mike Warkentin: 2:03
I understand for!

Matthew Becker: 2:07
So top three—I’ll try . Top one is, is rent—understanding not only base rent and how it’s calculated but then everything else that gets added onto your base that equals your monthly rent.

Mike Warkentin: 2:22
OK . That’s a huge one.

Matthew Becker: 2:23
That’d be number one . OK, number two is use of premises and how that is described in the lease versus like what you’re actually able to do and what you’re trying to do versus what the landlord thinks you’re doing . And then number three is all the additional things that you are in charge of as the tenant, like maintenance and insurance and covering insurance costs . OK . Those are the big three .

Mike Warkentin: 2:52
So there’s a ton more.

Matthew Becker: 2:55

Mike Warkentin: 2:56
But those are already like huge, huge things. So let’s just dig in. Talk to me about lease issues with regard to rent. You see a number: Is that the final number? what’s hidden in there? What are we not seeing?

Matthew Becker: 3:09
OK . So there’s typically gonna be about three, maybe four different numbers that are gonna come into what finally equals your monthly rent . Now, a lot of gym owners that we talk to give us leases and they say, “Yeah, my rent’s gonna be $3,500 a month,” and I get it and I start looking at the lease and I see that their base rent is $3,500 a month. So there’s a difference between your base rent and your actual monthly rent. Base rent is simply the price per square foot that you’re paying . It’s the amount of square footage multiplied by, let’s say $10 a square foot divided by 12 . And that’s your base rent . That’s just for the square footage .

Mike Warkentin: 3:54
So that’s your top number, but there’s more, right?

Matthew Becker: 3:57
Yeah. There’s more. The most common thing that then gets added onto that is generally what’s called “CAM fees,” short for “common area maintenance fees.” There’s a couple of different industry names for those , but they’re all the same fees . And what that means is it’s the cost that is associated with basically keeping your building up and running. So that might be repair roofing. That might be snow removal , mowing the lawn, you know, whatever additional costs the landlord has to pay in order to keep the building in good condition. Those are CAM fees ,and that gets added onto the base rent .

Mike Warkentin: 4:39
OK . So can those be significant?

Matthew Becker: 4:42
They can be , and they will adjust typically year to year because the landlord’s costs go up year to year .

Mike Warkentin: 4:52
So that could be like snowfall, right? Like , we’re talking like maybe there’s a record snowfall and the landlord’s gonna plow the parking lot 17 times instead of six. Those things could then come back in a CAM fee . And I guess that’s calculated each year. And then is it like backdated to the previous year? Or how does that work?

Matthew Becker: 5:10
So, and not to get too much into math, when we’re talking, But typically what you have is the fee that you pay throughout the year is an estimate based on last year’s CAM fee . And so at the end of the year, there’s a reconciliation and there’s gonna end up being two numbers that come outta that reconciliation. One is gonna be the estimated payment for the next year. And the second number that’s gonna come out of it is basically the difference payment compared to what you were paying every month compared to the actuality of the CAM fee. So you pay $500 a month in CAM fees for year number one. And at the end of year number one, they reassess what the CAM fees are. And they realize that cAM fees were actually $800 a month. Going forward, your rent will increase by $300 a month . The difference between that $500, you’re also gonna get a bill that says “last year they should have been $800. They were only $500.” So now you have to pay $300 times 12 in order to make up the difference of what they should have been.

Mike Warkentin: 6:29
OK. So we won’t dig into that too far. But you’ve got two big ones already. So we’ve got like your base rent. Let’s say it’s like $7.50 a square foot or something like that. Then you’ve got your CAM fees, which will be like, I don’t know , I’ve seen stuff like $7.50 plus $2.50 or something like that or whatever. Just throwing out ideas. But you will go see those two numbers. What else are people often missing in leases? Are there other fees that are gonna jump up?

Matthew Becker: 6:54
A lot of the unknown fees come in if the landlord requires you to pay all of your utilities. So electric’s a good one. Water , heating, cooling , depending on where your gym is located. And the landlord is not going to know what those numbers are. So those are gonna be unknown numbers. And the other big issue that we run into with utilities is some utilities sometimes are included in the CAM fees and some utilities sometimes are metered out to the individual tenant . And so it’s really important for the gym owner to know going in which utilities are covered in the CAM fees and which utilities are individual to that gym .

Mike Warkentin: 7:35
OK . So when I guess the best advice here is when a gym owner is scrolling through the listings and looking, and you see a square footage fee, the best thing you could probably take away from this is that that is one of the several fees that you will be paying that will go into your building. So on top of that, you’re gonna have maintenance fees. On top of that, you’re gonna have utilities, which in some cases will be billed by the landlord. And other cases might be different. Like I signed up for my own hydro account, for example, but my landlord took care of water and billed me back for that. So, like, it just depends on metering and things like that. But the lesson here is the square footage fee is not the only fee you have to worry about.

Matthew Becker: 8:10
Correct. Yep .

Mike Warkentin: 8:11
So when you review leases for gym owners, what do you see? Like do you see stuff in there that’s like not hidden, but the gym owners just won’t understand or they’re not aware—and how do you explain that to them ?

Matthew Becker: 8:24
Well, sometimes we don’t even understand. It can get so complicated. We reviewed a lease recently and we had to go back to the gym owner and say, “There’s about five different fees contemplated in this lease. Only two of them really have numbers associated with them. You need to go back to the landlord and ask what these other fees are.” But you know , typically what we do when we review a lease is first we highlight , “These are all the fees that the lease contemplates that you’re gonna pay. And this is the base. This is the estimated CAM fee based on what’s in here.” Often, it’s an additional , exhibit or whatever to the lease. “You know, here’s what you’re gonna pay in utilities. So you better ask what the utilities fees are. And here are the other fees that are all contemplated in the lease. So whether the numbers are in the lease, if the numbers are there, we’ll report back exactly to the gym owner with how much you need to expect to pay every month. If they aren’t there, we’re gonna say, “Hey, look: you’re gonna at least pay this amount. You also need to ask the landlord for estimates of what all these others are because they can be an additional $500 , thousand, $1,500 a month onto the base .

Mike Warkentin: 9:45
So that’s great. That’s a key tip: You can go back to your landlord and say, “OK, I’d like to know what the previous year’s utilities costs were just as a ballpark figure. So I can get my head around what I might need to budget for.” And again, if it’s hotter or colder, those might change. Let me ask you this with specific reference to CAM fees. Does the tenant have any control over that kind of stuff at all? Meaning like what if the landlords decides to like, “I’m going to renovate the lobby, repaint everything, buy new furniture, and I’m gonna bill a chunk of it back to you in fees .” Does that ever come up ?

Matthew Becker: 10:16
It can . And usually you’ll see that in instances where there’s like a multi- unit building , it’s not just you in the building. There’s maybe three or four other businesses in the building . Maybe they all share a lobby or they all share bathrooms or something like that divided amongst based on their square footage . So what you can do, if you don’t say like, you wanna try to cut some of that cost and you have no business using the lobby itself, you can go back to the landlord and say, “Look, we have no intention of using the lobby. We have no intention of using the lobby’s bathroom. We would like a credit against that square footage of that CAM fee or against the cost of maintainenance of the lobby .” Or like you said , “If you’re gonna redo the lobby , we don’t want to be part of that because we’re not gonna use it. And that could be a point of negotiation .

Mike Warkentin: 11:21
And when you do get a CAM statement at the end of the year , I’ve heard situations where sometimes landlords are just like, “Hey, you owe us, you know, an extra $8,000.” Can you as a tenant request an exact breakdown so you understand what is going into the excess that you’re paying?

Matthew Becker: 11:37
Yeah. I’ve never seen a lease that says—and I would never suggest to gym owner sign a lease that says—”you don’t get an opportunity to see how these fees are calculated.” You always have an opportunity to ask how the fees are calculated.

Mike Warkentin: 11:53
Okay . Cause I think I’ve seen some kind of like buddy-buddy handshake deals where it’s like, oh , OK, CAM fee. And then they’re just like “and here’s your bill.” And the owner was like , “Uh , that’s $10,000 . And I’d like to know what you were up to with that.” .

Matthew Becker: 12:06
Yeah, I was just gonna say that we have assisted some gym owners recently because of real estate and everything, in its current, state gym owners who are having leases coming up for renewal are seeing massive increases in both base rent and CAM fees. And we’ve helped gym owners go back and ask for those breakdowns.

Mike Warkentin: 12:46
I’ll ask you this because I tthink it’s an important question for people whose leases are coming up: With the crazy real estate stuff that’s happening right now, do you have any recourse if your base rent on the renewal goes up by like, you know , $8 a square foot or something large or are you kind of just SOL?

Matthew Becker: 13:02
There’s always a point of negotiation. I don’t wanna get too much in the weeds as far as like graduating leases every year and things like that . But a really easy thing to do is to either, if you don’t have a real estate broker, contact a real estate broker and ask for comparables in the area. And that’s been a really easy way to see, “OK, is this increase justified? Is this increase outta the realm of what else is in the area?” It just kinda gives you a little bit more backing to make an argument to the landlord about, “Look, I’ve been a great tenant for the last three years. I’ve been paying $10 a square foot. Now you wanna jump me to $18 a square foot. Like that’s a little bit excessive. Let’s work on this a little bit.”

Mike Warkentin: 13:50
OK . So the two takeaways from this first point are that your base rent number is not the only number you need to budget for. And a lawyer can help you figure out what your total costs are going to be with some variance based on utilities and some of those things that change from month to month and year to year. That’s the first thing. The second thing is that a lot of stuff seems to be negotiable if you know what you’re doing and potentially have some skills there, which a lawyer might have. And me, as a gym owner, I might not have this .

Matthew Becker: 14:16
Yep . Everything is negotiable .

Mike Warkentin: 14:19
Okay . And that’s good . In the media world people say, “How much does it cost to hire photographer?” I’m like, “We can cut any deal you want. You know, we can find one at this rate. We can like—there’s all sorts of deals.” And I think that’s a lot like what can be done. But I think a lot of gym owners might not feel like they can do that negotiation without some legal backing to say, “Here’s, what’s available. Here’s what we can do. Here’s some concessions we can do and so forth. So I love those two points. What was the second thing on your list of our big things that gym owners need to look at?

Matthew Becker: 14:48
We always really focus in on what’s called “the use of premises.”

Mike Warkentin: 14:52
Yeah. This is a huge one. Yeah .

Matthew Becker: 14:55
So usually the commercial landlord has no idea what you’re doing as owner , especially if you’re in some sort of functional fitness or powerlifting gym and you’re making a lot of noise .

Mike Warkentin: 15:10
I’ve got a story I’ll hit you with after this .

Matthew Becker: 15:12
Oh . So what happens is you go in and you start talking to the landlord or the landlord’s broker or whatever and you get this form lease that comes back at you and the use of premises says something like “we agree that the tenant will be using this as a gym or a gymnasium or a fitness facility.” And later on in the lease there’s all kind of other language about requiring what’s called “quiet enjoyment of the leased premises.” So we end up with this conflict because you have to go back to that use sup premise and make it far more specific. The landlord needs to know that you’re gonna make noise and they need to know that up front because if you get into it and you just sign the lease, you go, “Oh yeah, I’m running a fitness facility. Cool.” And you sign the lease, and then you start dropping 450-pound deadlifts, somebody’s gonna call and you’re gonna have a problem .

Mike Warkentin: 16:12
So I think what you’re probably looking at in a lot of cases, and this happened to me is like, you’ll see, when we were looking for buildings, you’ll see boilerplate stuff where it’s just like, this is a retail lease or this is a whatever. And it’s just the same lines always, you know, dumped into the same sections and so forth. It doesn’t apply to a CrossFit gym or a functional fitness gym or a weightlifting gym or whatever. And it happened with us where we had a building owner who thought “you guys would be a great fit for our basement. We’d love to have a gym facility for our upstairs tenants in an office building. We’d love to have you guys down here. Let’s talk it out.” I was like, “OK.” So what I did was I actually went down there and we brought 135 pounds. So I loaded a barbell with 2 45-pound plates. And I told him to go stand in the lobby, and I dropped it from overhead one time and he literally sprinted down the stairs and he says, “What the F was that?” And I said, “That was one time. And that was 135 pounds . Imagine double that like 60 times with 40 people.” He said, “You can’t rent here.”

Matthew Becker: 17:07
That’s exactly right .

Mike Warkentin: 17:08
So one of the hugest things that we see in our forums, whether the CrossFit Facebook group or even some of the broader ones that are public, is gym owners who are stuck in leases, where shortly after signing, they’ve run Grace or they’ve run some loud workout. They’ve cranked, their music and their landlord has an issue. So I’m getting from you that the important thing to do is to lay it out ahead of time exactly what’s gonna happen. Like, are we talking about like levels of noise, like in terms of decibels, o r just saying like, “This will be loud,” or how do you protect yourself going in so that the landlord has little cause to come back and say, “Hey, this is too loud.”

Matthew Becker: 17:42
I like to just put a sentence in there that’s something very similar to, you know , “The tenant will be operating a fitness facility known to cause excessive noise and play loud music .”

Mike Warkentin: 17:55
I love it .

Matthew Becker: 17:57
Put that in there.

Mike Warkentin: 18:00
When that’s in there and a landlord comes back and says, “Wow, it’s too loud,” do you have pretty good backing then to say, “Hey, it’s in the lease . We told you.”

Matthew Becker: 18:08
Yeah. Cause then you, as I mentioned earlier, there’s there’s always gonna be a provision in there that says that you, as the tenant, are agreeing to maintain the quiet enjoyment of the premises, and you then have to go back to the landlord and tell them you can’t sign that because you’re not going to respect the quiet enjoyment of the premises. You get that point out. And then, you’re right, by that point the landlord’s gonna be on enough notice that you’re gonna make noise that they’re gonna have real hard time coming back and yelling at you for making too much noise in the long run .

Mike Warkentin: 18:42
OK. So that’s a huge one because, again, so many times I run into—and it’s maybe changing a little bit now that functional fitness is becoming more common—but I’ve run into so many landlords who think “gym,” and they think of like, you know, the sort of quiet bodybuilding gym with a set of machines where you walk around and nothing hits the floor ever, except maybe like your water bottle. That’s not the case in a lot of these things. Here’s a question. If a gym owner is currently in a lease and is having conflict with their landlords over noise, what do you do if you haven’t put that clause in there in the first place and the landlord’s coming back at you? Are you kinda screwed or is that a negotiation point where you can try and figure something out or you just gotta move ? What do you do ?

Matthew Becker: 19:17
Well , the first thing you gotta do is if you really wanna try to negotiate it , you gotta talk to the landlord . Usually, if it’s a problem where it’s like , “you’re making too much noise,” they’re not gonna wanna negotiate anything that’s going to allow you to continue to make noise. So you do end up in a situation where you could be SOL at that point, and you’re have to start spending a bunch of money for noise mitigation. We’ve seen leases where the noise mitigation is written in there from the beginning because they know what they’re gonna do . So yeah, once you sign, these are legally binding contracts. They’re real hard to change until they come up for renewal.

Mike Warkentin: 19:56
Yeah. And I’ve seen, I literally saw this this morning. It popped up in one of the , uh , CrossFit owners groups , uh , saying, “Hey , any ideas on how to dampen the noise?” And I gotta tell you that there aren’t very many ways to do it. I’ve seen all sorts of stuff. In fact, Chris Cooper wrote an article about a gym in Manhattan with condos above and their whole situation. I think they ended up pouring a million dollars into cutting the floor and doing all sorts of stuff. And I’m not even making that number up. I think it was a million dollars into like trying to get the floor, you know, unattached from the columns and transferring vibrations and all that stuff. And they had crazy angry tenants upstairs, with good reason, you know , using decibel meters to try and calculate vibrations and it became a horrible, horrible thing. So I gotta say like, just from my anecdotal observations, you can’t fix this problem after the fact, if you’re making noise, you probably should be like writing that into a lease or making sure the building you’re in is full of like, you know, industrial welders and autobody mechanics and people are making as much noise as you are.

Matthew Becker: 20:51
Yeah. Nobody cares . You know , the other issue that you run into is, again , if you’re running one of these functional fitness gyms, you’re probably gonna have people running outside. I like to recommend that that gets put in the use of premises as well. Not only are gonna use the building , but you’re also gonna use the surrounding area outside of the building for lot sprints or runs or, you know , whatever it is.

Mike Warkentin: 21:21
So I’d recommend that if you are getting involved in leases and so forth, you might wanna talk to matthew@ gymlawyers .com at the very least. If you don’t do that, and you are working with a lawyer at present, you need to make sure that that lawyer understands exactly what your gym does. Right? If your lawyer thinks that you’re doing a bodybuilding situation with machines and you are slamming powerlifting barbells , you’re not gonna get the advice that you need. So you need to make sure you brief that lawyer on exactly what’s going on. And it’s so great that there’s so many lawyers that are now in the functional fitness community—guys like Matthew , who can help you with that. But if you run into an old schooler who doesn’t know what’s up, make sure you brief them. Now, number three, Matthew , what was the third thing? The big one on your list?

Matthew Becker: 22:02
Maintenance and insurance costs.

Mike Warkentin: 22:05
Okay . Hit me with that. That is a big one.

Matthew Becker: 22:06
So the common verbiage that people are gonna talk about and you might hear is “triple net .” And so what triple net essentially means is that the tenant is responsible for every cost of the landlord . These are pretty awful leases if you get stuck in one of these things-

Mike Warkentin: 22:27
Unless you’re a landlord, right.

Matthew Becker: 22:28
Yeah, if you’re a landlord. Sure . You have no cost . You no out-pocket-costs whatsoever . But aside from the CAM fees , there’s gonna be maintenance fees, like HVAC stuff, that’s gonna pop up in the building—replacing light bulbs, you know , not all of that is covered in the CAM fees. It’s gonna be in the maintenance fees.

Mike Warkentin: 22:48
Property taxes—is that one?

Matthew Becker: 22:50
Operating taxes . Yep . Property taxes. And building insurance. So we always make sure that the lease itself has a provision that says the landlord has to maintain insurance on building . Cause surprisingly that’s not in all the leases . Um , but then, you know , the tenant needs to understand whether or not they’re responsible for paying that yearly insurance as well. And it kinda seems backwards to me, but the industry supports it. So the landlords get away with it.

Mike Warkentin: 23:23
OK . So is there room to negotiate on a triple net? And I think I’ve seen these referred to as NNN leases or three-N leases. So if you see those terms, that’s what we’re talking about. Is there any negotiation room on something like this or are you just kind of stuck with the deal and you’ve gotta budget those costs?

Matthew Becker: 23:40
Again, everything is negotiable. It kinda , it really depends on the market itself. I would say it’s probably gonna be the biggest factor if the space that you’re going after is just out in the middle of nowhere and nobody is really gonna be going after the space, then you have a lot more negotiable power than you do if—it’s like buying a house . If you go buy a house and you wanna pay $200,000 for the house , but there’s three other people or three other couples trying to bid on the same house. It’s just going to raise the price and make the house harder to get. Same thing with the lease. If there’s three other businesses looking at this space , then the landlord’s gonna be far less willing to negotiate on some of these terms than they will be if this has been sitting vacant for a year or two, and he’s not getting any bites on it for anybody to rent it . But yeah, triple net, it is negotiable. And oftentimes what you’ll see is either an increase in base rent , you know , not up to the extent of covering all these costs , but an increase in base. or you can always negotiate an increase in time of the lease–the term of the lease , whether it’s 4, 5, 6, 7 years.

Mike Warkentin: 24:55
In these triple-net leases , some of the stuff you you listed off, it sounds like this can really add up fast. Am I right about that?

Matthew Becker: 25:02
Yes, it can. It can.

Mike Warkentin: 25:05
Okay . Cause like I’m thinking just in terms of property taxes in a functional fitness facility, that’s say , you know, 3, 000, 5,000 , 10,000 square feet. You could run into some crazy numbers there. All of a sudden. And I did hear about one of the oldest, not oldest in terms of age, but one of the longest standing CrossFit affiliate owners in the world , I think he actually closed down an affiliate because of a triple-net lease. When it got to, like, there was some cost increases and he was responsible for them . And I think he had to get outta that facility ASAP when his lease was up, because it was just like, if I recall the numbers were like in the tens of thousands of dollars. Is that a common scenario—when costs balloon and all of a sudden you’re responsible for more?

Matthew Becker: 25:44
I don’t know that it’s commmon. I wouldn’t say it’s common that costs increase by that much . More commonly what we see is gym owners originally are like , when they’re opening up their gym, they’re desperate to get into a space. And so what they’ll do is they’ll agree to a triple-net lease just because they’re like, “I gotta get my space. I gotta get my gym open . Everything will be okay .” And then it comes up for renewal. And now they’re kind of stuck between this rock and a hard place: “I’ve now been operating in this space for five years. But my landlord wants me to sign a triple-net lease. Now I understand what that is. And I understand how much cost is now associated with that. But there’s also a significant cost with moving my gym and finding a new location and getting a lease. Etcetera. You have to do it often six months in advance of the end of your current lease. So it’s not necessarily that it increases. It just becomes like something that you can’t get rid of. So once you sign the lease that’s got triple net, it’s really hard to then get outta that when it comes time to renew it.

Mike Warkentin: 26:54
We’re going to wrap this show up, and we’re gonna follow up. I have some more questions for you. We’re gonna put in a part two , but for the first section here, we’re talking about leases. What is the best thing that a gym owner can do to protect themselves overall when it comes to leases? Is it contact you or what do they do? Because again, you’re looking at these like 45-page documents. Like, I saw them. I don’t have a clue what they are—clause this, subsection that. You know, I don’t know what I’m doing. So how does your basic gym owner protect themselves to the Nth degree or as much as they can?

Matthew Becker: 27:24
Well, obviously contact me. Right?

Mike Warkentin: 27:29
But I mean, you are offering a service that wasn’t available when I opened a gym, so this would’ve helped me big time. Luckily I had the wife of a member jump in and save my butt. But legitimately, this is a service that gym owners have been begging for. So I’m glad you opened this thing. But let’s say someone doesn’t use you. Is it just like, “get a lawyer and try and figure this out ?” What do they do ?

Matthew Becker: 27:52
Yeah . And thanks for that , Mike . I appreciate you saying all that. At the very least, get somebody to look at it and not, you know–I’ve had gym owners call me and say, “Well, I had a real estate broker look at this and he or she said blank.” And that’s “no.” Like, don’t go for the real estate broker. Go for an attorney who knows legally what people get sued for on through these things and what’s potentially gonna pop up. Now that’s at the base: Get an attorney. Now, as you’ve said, kinda alluded to through this show, a base attorney may or may not be good enough because we have a unique industry and there’s gonna be unique problems that pop up. And I can tell you stories as well of local gym owners here who have had issues with inexperienced attorneys—and not inexperienced in the sense of the law but inexperienced in the sense of how the law relates to owning a gym. I would say the biggest problem that we see is gym owners coming to us too late in the game . Um , you know , an easy example of this is I had somebody reach out and it was an email, and the gym owner said, “You know , I need you. I’m wondering what it would be like for you to review this for me .” And I said , “Yeah, here’s what we do . And here’s the service. we provide a point-by-point briefing analysis of what it is that you’re agreeing to, and we send that all back to you” . And he said , “OK, well, let me finish up my negotiations and then I’ll send it to you for final review .” And it’s like , “No, that’s the exact opposite time . Send it to me now because once you’re done with all negotiations and you’ve agreed with the landlord that these are the final terms, and all you gotta do is put your signature on it, what am I gonna review ?”

Mike Warkentin: 29:41
All you’re doing is you’re putting that yellow “sign here” sticker on and saying, “That’s where you put your name .”

Matthew Becker: 29:45
Yeah. Now I’m gonna come up with a whole bunch of problems that I have with the lease , but it’s too late. You’ve already told the landlord that you’re good to go with the lease. So get somebody in the beginning.

Mike Warkentin: 29:58
Is the beginning, like, would you talk to an attorney before you even start looking? Or would you talk to an attorney when you’re starting? what’s the exact right time to get an attorney involved?

Matthew Becker: 30:17
I believe the exact right time is when you start looking. And that doesn’t mean that you’re gonna incur a cost when you start looking . OK . That’s the other thing that I think kinda gets commonly misunderstood is, you know , people think , “Well, as soon as I call an attorney , it’s gonna cost me $500. That’s not the case . But some commercial landlords will utilize, what’s called a “letter of intent .” And so you go and you look at a space and you’re like, ” Yeah, I love the space. Let’s start negotiating the lease.” And then the next thing , you know , you get what’s called a letter of intent , which is a letter from the landlord that outlines what could be the terms of the lease . And they will put pressure on you as the gym owner to sign within five days of the receipt of the letter of intent in order to secure you the right of refusal on the premises . And so this legal stuff starts from the second you find a location? So real important, even when you just start looking, is to just call, you know, call us, send us an email and say, “I’m looking. What should I know about while I’m looking?” It’s not gonna cost you anything until we start—I like to say it doesn’t cost you anything until I start actually thinking about things, and then I’m gonna charge you for my thoughts. But just to say, “Hey, we’re going out, we’re looking, and what should we know about?” You know , I’ve got pamphlets. I can send you the top six areas of commercial leases that you need to know about. I’ll send you that . And so you can start looking at this stuff , talking about this stuff , when you’re looking at commercial spaces, and then , you know , right away , “I like this commercial space .” And then we really start stepping in and helping you negotiate the leases or the letters of intent.

Mike Warkentin: 32:09
OK, cecause we’re talking a lot about budgeting and I know everything is very different depending on the intricacies of everything, length of leases, but how much should people set aside, ballparking, for legal review of a lease? Like what’s too much? What’s not enough? What should people start putting into their opening costs for legal fees ?

Matthew Becker: 32:26
A basic just review of a lease will probably run you a couple hundred dollars . An attorney’s probably gonna take about an hour or so to look through one, cause like you said, they’re 40 pages long they’re 25 pages long and it’s legal stuff . We gotta sit down. We gotta through this language . If you’re gonna use an attorney through the entire process, like we’re talking about right now, I suggest you should be budgeting somewhere around $500 to a thousand dollars .

Mike Warkentin: 33:03
OK . And I can tell you that when I heard numbers like that 10, 11 years ago, and I was signing leases, I was like, “Oh man!” I was starting to worry. Cause I that’s like three barbells I couldn’t buy. But when I paid that cost, it did come back in the end because I ran into some stuff that the lawyer had changed that saved me that money plus way more. So I would say the return on my investment there, and it took a couple years to get there, but I’d say the return on my investment personally was in the realm of like four to five X. So definitely worth it. But you know, at the time I was like, “I don’t know if I wanna do this .” It pay off.

Matthew Becker: 33:38
Yeah . I was gonna throw this other little thing in there: Sometimes we review a lease and suggest you don’t sign . I think that’s where a lot of our value comes in. The gym owner comes to us and says, “Would you mind looking at this lease for us?” And we say, “Don’t sign it.” And they spent , you know , maybe $500 , but ended up saving thousands, tens of thousands of dollars over a five-year term of the lease because of the problems that we found in the lease.

Mike Warkentin: 34:13
The New York example, I went through with Manhattan potentially that would’ve been , been a million dollar savings right there . And you can find that article by Chris , Chris Cooper in the CrossFit Journal. Where can people contact you if this is a service that they want to engage in ?

Matthew Becker: 34:29
The best way is just to go to our website, Gymlawyers .com . We have calls to action all over the website. My cell phone number is actually in the contact info on that website. My email is matt@gymlawyers .com . But I always just throw people to the website cause there’s so much information there and the calls to action and the email forms and everything are all already there.

Mike Warkentin: 34:54
Perfect. So this is gonna be part one of this series. In part two, we are going to talk about buying and selling a gym . So that was Matthew Becker. He is a gym owner and he is the man behind Gymlawyers .com . I’m your host Mike Warkentin. Be sure to subscribe for more episodes. Now here’s a final word from Two-Brain founder Chris Cooper.

Chris Cooper: 35:13
Hey, it’s Two-Brain founder, Chris Cooper with a quick note. The Gym Owner’s United Facebook group has more than 5,600 members, and it’s growing daily. If you aren’t benefiting from the free tips and tactics and resources that I post daily in that group, what are you waiting for? Get in there and grow your business. That’s gym owners United on Facebook or www gym owners , . Join today.

Thanks for listening!

Thanks for listening! Run a Profitable Gym airs twice a week, on Mondays and Thursdays. Be sure to subscribe for tips, tactics and insight from Chris Coooper, as well as interviews with the world’s top gym owners.

To share your thoughts:

To help out the show:

  • Leave an honest review on iTunes. Your ratings and reviews really help, and we read each one.
  • Subscribe on iTunes.

One more thing!

Did you know gym owners can earn $100,000 a year with no more than 150 clients? We wrote a guide showing you exactly how.