Lock in the Lease🔒🏠: Lease Terms That'll Help Sell your Business

When it comes to selling a hospitality business – whether it's a Bakery in Katikati, a bar in Mount Maunganui, or a fish and chip shop in Papamoa – the lease can make all the difference between a smooth sale and a buyer walking away. Banks don’t just look at your P&L; they care about how much time is left on the lease, how secure it is, and whether there are any risks hiding in the fine print. If buyers can’t get the finance they need, your sale could stall before it even gets started.

The good news? There are a few things you can control to make your lease more attractive to buyers and banks. It’s all about timing, certainty, and having the right conversations with your landlord before you put your business on the market.

Longer Lease, Easier Loans

Here’s how it works: Banks align loan terms with the remaining lease period. If your lease only has 7 years left, the buyer might get stuck with a 3.5-year loan, meaning higher repayments. But if the lease has 10 years remaining, the buyer could secure a 5-year loan with lower, more manageable payments.

A longer lease, especially with extra rights of renewal, makes banks feel more comfortable lending. It also gives buyers the confidence they need to operate the business for many years to come. Nobody wants to take over a business only to be forced out a few years later when the lease expires.

So, what can you do? If your lease has less than 8 years left, now’s the time to chat with your landlord. Ask if they’d be open to adding extra renewal options to push the final expiry date further out. Even if you’re not quite ready to sell, having this conversation early can give you a smoother path when it’s time to go to market.

Does Your Landlord Pass the BOP Vibe Check?

Here’s something buyers won’t ask outright, but they’ll definitely be wondering: What’s the landlord like? Are they reasonable and easy to get hold of? Or are they the type to make things difficult, ignore emails, and drag their feet on requests?

I know of at least one 'notorious' landlord here in Tauranga who’s known for being difficult to deal with. No buyer wants to inherit that kind of relationship. If your landlord has a reputation for being easy-going and reliable, it’s a big selling point – and you should let buyers know.

Keep a log of all your interactions with your landlord, including emails, phone calls, and meetings. Being able to show buyers that your landlord is a good sort helps build trust and gives them confidence that they won’t have issues down the track.

Redevelopment Clauses: Don’t Get Caught Out

🤞🏼 Fingers crossed you don't have one of these 😅. Redevelopment and demolition clauses can also complicate things. These clauses give landlords the right to end the lease early if they want to redevelop the property or if it needs to be demolished. Even if there are no immediate plans, the possibility alone is enough to make banks nervous.

If you’ve got a decent relationship with your landlord, see if they’d be willing to tweak the clause. You could ask for a minimum period – say 5 or 10 years – during which the clause can’t be activated. The longer the buffer, the more comfortable banks will feel lending to buyers. If the only thing holding things up is legal costs, offering to cover the fees might sweeten the deal.

Covering Costs: Make It Easy for the Landlord to Say Yes

If you’re asking your landlord to alter the lease for your benefit, it’s worth offering to cover any legal fees involved. Lawyers are usually required to make adjustments, and those fees can quickly become a roadblock.

Covering the legal costs shows goodwill and makes it an easy decision for your landlord. Whether you’re asking for extra renewal options or adjusting a redevelopment clause, taking care of the fees increases your chances of getting what you need – and sets you up for a smoother sale.

Wrapping It Up: Plan Ahead for a Smooth Sale

Selling a business in Tauranga – whether it’s a café in Mount Maunganui or a Papamoa restaurant – comes with plenty of challenges. Don’t let the lease be one of them. The structure of your lease can have a massive impact on a buyer’s ability to secure finance, so it’s worth addressing any issues early.

If you can extend your lease or secure extra renewal options, you’ll make your business more attractive to buyers and lenders. And don’t underestimate the power of a good landlord – buyers care about who they’ll be dealing with, even if they don’t ask outright.

The earlier you start these conversations, the better your chances of a smooth and successful sale. Remove the roadblocks, and both buyers and banks will feel more confident saying “yes.”