Commercial Lease Assignment When Selling a Business in NZ

For a location-based business, the lease may be one of the most valuable assets and one of the largest risks. A profitable operation can become difficult to finance if the premises cannot be transferred on sensible terms.

Review the lease before setting a price

Check the remaining term, rights of renewal, rent reviews, outgoings, permitted use, fit-out ownership, make-good obligations, personal guarantees and assignment process. Look for relocation, demolition or redevelopment clauses that could change the business's location.

Ask whether the premises are part of the value

A café, salon, clinic, workshop or retail business may depend on foot traffic, visibility, parking, access and local customer habits. If the lease is short or uncertain, the buyer may discount the value even when current sales look strong.

Get consent early

Landlord consent can take time and may require financial information about the buyer. Include lease assignment as a condition of the transaction and ask a commercial property lawyer to review the document. A business valuation should reflect the real lease risk, not just the current profit.