The booth rental agreement is for any hair or nail salon, barbershop, massage parlor, or any other service being provided where the owner of the business rents “booths” as part of their business. Most booth agreements are in businesses where the hairstylist or massage therapist is an independent contractor, not an employee, and pays for the rental of their booth in addition to a portion of their revenues.
As an example, if a hairstylist uses the business location to service their clients, the hairstylist will pay a weekly or monthly amount to the business owner. In addition, if the hairstylist made $1,000 that month, the booth rental agreement may call for 50% of their revenues to be given to the business (less any tips).
Table of Contents
- Independent Contractor Status
- How Does a Booth Agreement Work?
- How to Write a Booth Rental Agreement
Due to many States ratcheting up their laws against independent contractors the booth rental agreement is a useful tool proving the person is not an employee.
As an example, in California the “ABC test” no longer applies as the new law (AB-5 Worker Status), which applies retroactively, covers new ground such as “the work performed by the contractor be outside the employer’s core business”. In such a setting the owner of the booths can claim they are in the business of subleasing space and that the contractors are performing their licensed service.
Employment laws are constantly changing and it’s important that a business owner does everything they can to protect their rights.
A booth agreement is between the owner of a business and the tenant, or the contractor, who agrees to rent a booth or an area of the business for rent and a percentage (%) of their gross revenues. A booth agreement can be for a fixed period of time or for a week-to-week or month-to-month basis with a minimum termination period. Of course, if either party defaults on the lease the agreement will terminate and there may be a liability on either party’s side.
- Hair Salons;
- Beauty Parlors (cosmetologists);
- Massage Parlor;
- Nail Salon;
- Dog Grooming Parlor;
- Carpenter or Craftsman; or
- Any retail use.
Step 1 – Booth Owner Looks for Renters
Again, keeping in mind employment laws, when looking for a hairstylist or anyone to rent a booth it’s important to write in an advertisement “Booth for Rent” while stating the business’s name. Do not write “Hairstylist position available” or “massage therapist availability”. An individual could use this claim that it’s actually an advertisement for a position.
This is strictly a sublease arrangement according to employment laws and the owner of the business must advertise the booth as a rental with a portion of their revenue being made part of their “percentage rent”.
When qualifying a tenant, the most important qualification is determining if they will be able to pay rent on-time. If the tenant is new at the profession, the business owner and they may want to structure the agreement to factor in the elevated risk of default.
When evaluating any candidate, it’s important to consider the following factors:
- How long they have been in the business?
- How long have they been working in the local area?
- How many individuals do they have on their Client list?
- What did they claim on their IRS Form 1099-MISC or W-2 the previous year?
- Do they ever been convicted of a misdemeanor or a felony?
Running a Credit and Background Check
Just like any residential or commercial landlord, it’s best for the business owner to run a basic credit report and background check on the tenant to ensure they are not a liability to the owner or any of the other contractors in the place of business.
It’s best to use the following services:
After the creditworthiness of the tenant has been verified the booth agreement can be negotiated with this in mind. If the business owner believes that the tenant will be bringing in lots of clients that, in turn, will help the other contractors, it may be best to charge a lesser rent. If the tenant is someone that carries an elevated risk, it may be best to have them on a month-to-month agreement with higher rent or percentage of their revenues to go to the owner.
Main Items to Negotiate
- Rent (monthly, weekly);
- Percent (%) of Gross Revenue;
- Term (start and end dates);
- Termination Period;
- Tenant’s responsibilities (utilities, property taxes, etc.); and
- Hours of operation.
No matter what is decided, the booth rental agreement should be written along with an Independent Contractor Agreement (Adobe PDF, MS Word (.docx)) and IRS Form W-9 to be completed by the tenant. This will give the business owner the confidence and security that they will be protected and that the tenant will not be considered an employee.
Step 4 – Tenant Moves in
Once the agreement has been finalized and the necessary documents have been completed it’s time for the tenant to move-in to the premises and to begin providing their service. Depending on the business and the landlord, the tenant may be required to use their own tools, equipment, and accessories.
1 – The Booth Rental Agreement Can Be Downloaded Through The Links Provided
A few file types for this agreement have been supplied. Select the file you wish to work with from the links above to obtain an “Adobe PDF” or “Microsoft Word (.docx)” file.
2 – Identify The Lessor And Lessee Of The Concerned Booth Or Property
There will be several articles containing information making up this agreement. Each one will deal with a different topic that must either be discussed, supplemented with information, disclosed, or all of the above. The first of these, “1. The Parties” will begin with a declaration of what calendar date will be attached to this agreement. Use the first two blank spaces in this sentence to make sure this calendar date is displayed. The next area of this article will bear the label “Lessor.” Present the full name of the individual or entity that is renting the booth or concerned property to the Tenant. This is typically the name of a Property Owner, Landlord, or Property Management Company. After supplying this identity record the mailing address of the Lessor on the next blank line. In addition to the Lessor, we must also submit a definition as to who is renting the Booth or Property. That is, the Tenant. Fill in the legal name of this party or entity on the blank line attached to the bold label “Lessee.” Once you have done this, make a submission of the Lessee’s full mailing address to the remaining blank lines on this statement.
3 – The Rental Booth Or Property Should Be Adequately Described
The second article of this agreement carries the label “2. Leased Premises.” Locate the first empty line here then use it to solidify the exact “…Street Address Of” the booth or property being rented. This should contain the building number where it is located, the street name where that building is found, and (if necessary) the unit number of the rental booth. In addition, it this mailing address must provide the city, state, and zip code where these premises are found. This document also requires the approximate size of the booth being rented. Find the term “…Foot By…Foot Sized State…” then utilize the empty lines that surround this phrase to give the size of each different sized wall.
4 – Submit Proper Documentation Of The Lease Terms Where Requested
The article named “3. Term Of Agreement” will have a slightly different format then the two before it. Here, you will need to mark the box corresponding to one of three descriptions. This portion of the agreement will present the agreed-upon time frame for its agreement. Two basic options exist. One where the lease will have a predetermined start date and termination date and one where it will only have a predetermined start date. In any case, whichever scenario best defines the desired rental agreement you select, additional material will be required.
If this rental arrangement will have a definitive beginning and end to its effect then select the “Fixed Lease” checkbox by marking it with an “x” or a checkmark. The statement defining this scenario will need to have the exact calendar date when the rental terms first become effective submitted to the first two blank lines and the calendar date when this agreement terminates on the next two blank lines. As mentioned earlier, this lease can have a defined start date but no defined termination date. If this is the case, then either the second or the third statement must be selected. If the agreement should be renewed at the end of every month with a monthly rent payment then mark the second checkbox (“Month-To-Month Lease”). You must also report the calendar date when this agreement first becomes active across the first two blank lines. After doing so, enter the number of days written notice one party must issue the other when he or she wishes to terminate the agreement. The last statement provides for a lease that will have a predetermined date of effect to start and will renew its terms with weekly rent payments. If this is the aptest description for the intended agreement then mark the “Week-To-Week Lease” checkbox then enter the desired start date across the two lines after the words “…Begin On” Now that we have addressed the issue of when the lease will stand effective, where the concerned booth is located, and the identity of the participants, we will need to discuss how much must be paid to the Lessor by the Lessee in exchange for use of the booth or property and how often. This subject will be covered in the fourth article; “4. Fixed Rent.” Record the dollar amount that must be received as a rent payment on the first blank space (in words) then enter it numerically on the blank line in the parentheses. The next task of this article will be to indicate how often the Lessee’s payment must be submitted as rent to Lessor. If it will be once a week, then mark the first checkbox statement and enter the day of the week that a rent payment must be received on the blank space provided.
If the rent is due once a month, then mark the second checkbox and enter the calendar day the Lessee must pay the Lessor on the line preceding the term “Of Every Month”Another type of payment the Lessee may be responsible to make to the Lessor may be a “Percentage Rent.” Locate item A in this article, then indicate if the Lessee will need to make such payments by marking the first checkbox under the bold words “Percentage Rent.” You will also need to record the percentage of the Lessee’s profits that he or she must submit to the Lessor. This report must be provided on the blank lines as a written percentage and numerically in the parentheses just before the “%” sign. If the Lessee will not be obligated to pay “Percentage Rent,” then mark the second checkbox (attached to the statement “This Lease Does Not…”). The fifth article of this document, just after the bold words “5. Payment Of Rent” will present three checkboxes. Mark the one that names the method of payment the Lessee must use to pay the Lessor. Mark the first checkbox to indicate the Lessor requires “Check” payments or the second box if “Cash” payments are required. If neither of these options adequately define the payment method that should be used when the Lessee submits the rent, then mark the “Other” box and detail how the rent must be paid. Notice in the example below the rent must be paid by “Check.” The next article that will require your input is “8. Equipment And Personal Property.” We will use this article to define what equipment (if any) the Lessor will be obligated to provide the Lessee. This task is accomplished by marking the checkbox labeled “Booth,” “Chair,” “Table,” and/or “Other.” You may check as many of these items as appropriate. The “Other” option will contain a blank line that will allow you to list any equipment the Lessor will supply the Lessee during the time this agreement is active. The Lessor and Lessee will need to agree upon who will be responsible for the payment of which utility bills during the effect of this lease. To accomplish this we will mark the checkboxes in “11. Utilities” to report what the Lessor will pay for. Five checkboxes labeled “Water,” “Electricity,” “Telephone,” “Heat,” and “Other.” Whichever checkbox is selected will name a “Utility” the Lessor will pay for. The “Other” box in this section will also contain a blank line you can use to report any utilities or services that the Lessor must pay for but has not been included in this list. Article “!2. Taxes” will answer the question of who is responsible for the real estate taxes owed for the booth or property. If it is the Lessee then mark the first checkbox however if it is the Lessor, then mark the second checkbox. hile it is unfortunate when any Tenant defaults on their lease, it is wise to solidify some time frames. In the article “14. Default By Lessee” find the first blank line then enter the number of days after an unanswered violation notice sent from the Lessor to Lessee goes unanswered when the Lessor may consider the Lessee officially in default. If the Lessee is in default, then use the second blank space to display the number of days after a Lessee’s declared bankruptcy, insolvency, etc. has been established that the Lessor can enter the premises.
5 – Supply Some General Information Then Execute This Agreement
The nineteenth article, labeled “19. Governing Law,” presents a blank space where the name of the state whose jurisdiction and court system will hold the signature party members of this paperwork responsible for following its contents.Any material not covered by the articles in this agreement must be supplied to the blank lines in article “24. Additional Terms & Conditions”
The calendar date when the Lessor and Lessee will formally enter this agreement will be a necessary item at the close of this document. Three blank lines after the term “…As Of This” in the last statement should have this date supplied to it.
The Lessor must sign and print his or her name then enter the calendar date when these actions were performed. Three blank lines labeled “Lessor’s Signature,” “Print Name,” and “Date” grant an area for these actions to be completed
The Lessee renting the booth should also participate in this execution. He or she should provide his or her signature and printed name on the “Lessee’s Signature” and “Print Name” lines then enter the current “Date” on the next line.