The commercial lease checklist for shops and cafés

For most main-street businesses, the lease is the most important document they’ll ever sign — more important than any loan agreement. It fixes your location, your biggest overhead, how much you can spend on the fit-out, whether you can grow, and what your business is worth when you sell. It’s also the document owners most often sign in a hurry, because they’ve fallen in love with the space.

This checklist is designed to slow that moment down. It isn’t legal advice — business.govt.nz is clear that you should get professional help if you don’t have in-depth experience with commercial leases — but it’ll help you ask the right questions and have a better conversation with your lawyer and the landlord’s agent.

Why does the lease matter so much to funding?

Lenders funding a fit-out, refurbishment or business purchase look closely at the lease, because so much of a main-street business’s value is tied to its location. A café with a strong lease is a saleable asset. The same café with nine months left and no right of renewal is a gamble.

When you apply for funding, expect questions about:

• How long is left on the lease, including rights of renewal
• When the next rent review is and how it’s calculated
• Whether the landlord has consented to your alterations
• What you’ll owe at the end (make-good)
• What security the landlord holds (bond, bank bond, guarantee)

Get these right at the start and later funding is far easier.

Is the term long enough?

1. What’s the initial term, and how many rights of renewal are there? Many owners prefer a shorter initial term with several renewals — it protects your investment without locking you in if the location underperforms.

2. Does the total period cover your fit-out’s payback? If your fit-out needs five years to pay for itself, a three-year lease with no renewal is a problem.

3. What’s the final expiry date? Know the date beyond which you have no right to stay.

4. Can you exit early? Business.govt.nz suggests negotiating flexibility in end dates, including rights to expand or shrink and options to sub-lease.

How will the rent change?

5. When are rent reviews, and how do they work? Common approaches include fixed increases, reviews linked to inflation, and market reviews. Know which you have and how often.

6. Is there a ratchet? Some leases prevent rent from ever falling at a review, even if the market drops. Ask your lawyer to explain how your review clause works.

7. Which outgoings do you pay? Business.govt.nz suggests discussing expense responsibility up front. Outgoings can include rates, insurance, maintenance and management fees. Ask for last year’s actual figures, not just an estimate.

8. Are there any rent-free periods or incentives? Business.govt.nz notes landlords often provide incentives, especially for longer leases. Rent-free time during your fit-out can make a real difference to cash flow.

What security will the landlord want?

9. Is there a bond, a bank bond or a personal guarantee? Business.govt.nz describes a bank bond as a fee-based financial agreement, and a personal guarantee as an arrangement where the business owner assumes responsibility for the debt. Each ties up something of yours. See our page on funding a lease bond or deposit.

10. Can the guarantee be limited? Ask whether a guarantee can be capped, reduced after a period of on-time payments, or released when the lease is assigned.

11. When is the bond returned? Know the conditions.

What can you build, and what must you remove?

12. Who pays for the fit-out? Business.govt.nz suggests confirming who pays for renovations and whether the landlord will contribute. Get any contribution in writing.

13. What alterations need consent? Most leases require landlord consent for anything beyond minor work. Agree the scope before you sign.

14. What are the make-good obligations? Business.govt.nz highlights make-good provisions — the condition you must return the premises in. If you have to rip out a café kitchen at the end, that’s a real future cost.

15. Who owns the fit-out at the end? Some leases let the landlord keep improvements; others require removal. It affects both your exit and your tax position — Inland Revenue treats commercial fit-outs as depreciable separately from the building.

Planning the fit-out as well? Our fit-out budget guide pairs well with this checklist. And if you’d like to talk through funding for the bond and fit-out together, start a 60-second enquiry — there’s no credit check to ask.

Can you trade the way you want to?

16. What’s the permitted use? Make sure it covers what you’ll actually do — and what you might do later. A “retail” use might not cover a café with seating.

17. Will you need a change of use? If the space was used for something else, talk to the council. Auckland Council, for example, says you must notify it in writing of a change of use, and you may need a building consent if work is needed to meet the Building Code.

18. Signage, hours and parking? Business.govt.nz lists signage rights, parking and tenant use restrictions among the terms to discuss. For a main-street business, signage can make or break visibility.

Is the building safe and sound?

19. Have you seen structural and asbestos information? Business.govt.nz recommends requesting structural assessments and asbestos reports, and lists neglecting earthquake-safety checks among the common pitfalls.

20. What happens if the building is damaged? Read the clauses covering earthquakes, fire and other damage — including whether rent stops if you can’t use the premises.

The checklist at a glance

Area	Key question
Term	Does term plus renewals outlast your fit-out payback?
Rent	How and when is it reviewed, and is there a ratchet?
Outgoings	What are last year’s actual figures?
Incentives	Is there rent-free time or a fit-out contribution?
Security	Bond, bank bond or guarantee — and can it be limited?
Alterations	What needs consent?
Make-good	What must you remove or restore at the end?
Use	Does the permitted use match your plans?
Building	Structural, asbestos and damage clauses checked?
Assignment	Can you sell the business and pass on the lease?

How does this fit with funding?

A well-negotiated lease makes everything else easier. It supports funding for the fit-out, lets you plan cash flow around predictable rent, and protects what you’ve built when it’s time to sell or expand. A poor lease does the opposite.

If you’re buying an existing business, the lease is just as important — our guide to buying an existing café covers assignment and what to check. If you’re expanding, read our page on taking the shop next door.

How do you negotiate without losing the site?

Many owners worry that asking for changes will cost them the space. In practice, landlords expect tenants to negotiate, and a well-prepared tenant is often seen as a lower risk. A few principles help:

• Prioritise. Decide which three or four terms matter most — usually renewals, rent reviews, make-good and the guarantee — and focus there.
• Trade, don’t just ask. A longer initial term might earn a fit-out contribution or a rent-free period.
• Put it in writing early. Agree the key commercial terms in heads of agreement before the lawyers draft the lease.
• Use your lawyer. Let them handle the detail so you can keep the relationship friendly.

Ready to fund the move?

Once your lease is sorted, the bond, fit-out and opening costs usually follow quickly. If you’d like to see what your business could qualify for, start your 60-second enquiry. Asking doesn’t leave a mark on your credit file, your details stay with one team rather than being passed around a list of lenders, and a person who understands main-street premises will ring you. Please be accurate about the lease terms, the costs and your trading — it helps us match you properly the first time.