Sarah is a content and copy writer with a background in merchant banking. She has a passion for putting technical language into plain English and is a contributing writer for Sprintlaw.
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Signing a lease is one of the biggest “make or break” moments when you’re opening (or expanding) a cafe or restaurant. The right site can help you build a loyal customer base and grow quickly. The wrong lease terms can quietly drain your cashflow or leave you stuck with a space that doesn’t actually work for hospitality.
This guide is updated to reflect current expectations in the market and the practical legal issues we’re seeing come up for NZ hospitality businesses right now. We’ll walk you through the key things to check before you sign, what to negotiate, and where owners most commonly get caught out.
And yes - leases can feel dense and “legal”. Don’t stress. Once you know what to look for, you can approach negotiations with a lot more confidence.
Why Cafe And Restaurant Leases Are Different (And Higher Risk)
Cafe and restaurant leases have extra moving parts compared with many other retail or office leases. That’s mainly because your business depends on the premises being fit for hospitality operations, not just “a space with four walls”.
For example, you might need:
- Commercial extraction/ventilation and grease management
- A layout that meets food safety and hygiene requirements
- Plumbing and drainage capacity (sometimes including grease traps)
- Access for deliveries, waste removal, and staff
- Seating rules (indoor/outdoor), signage rights, and sometimes liquor licensing implications
If the lease doesn’t clearly allocate who pays for upgrades, repairs, compliance work, or reinstatement, you can end up spending far more than you budgeted - even if the rent looks reasonable.
It’s also common for hospitality businesses to invest heavily in a fit-out. That means your risk increases if the lease term is too short, renewals aren’t secure, or the “make good” clause forces you to rip everything out when you leave.
If you’re weighing up whether to take legal advice before signing, this is one of those scenarios where a small issue in the lease can become a very expensive problem later. A Commercial Lease Review can help you spot the hidden issues before you’re locked in.
Key Commercial Terms To Get Right Before You Commit
Most lease disputes don’t happen because someone is “bad”. They happen because the lease terms weren’t clear, or the tenant assumed something was included when it wasn’t.
Rent, Rent Reviews, And Incentives
Start with the obvious: rent. But don’t stop at the weekly or monthly figure.
Make sure you understand:
- When rent increases (fixed increases, CPI adjustments, market reviews, or a mix)
- How “market rent” is determined and what evidence is used
- Any rent-free period (and whether it’s conditional on opening by a certain date)
- Any landlord contribution to fit-out and whether you must repay it if you end early
A rent review clause that sounds standard can still be risky if it’s one-sided (for example, rent can go up but can’t go down, even if market conditions change). It’s worth understanding this upfront because your pricing, staffing, and margins will have to absorb these changes.
Term, Renewals, And Your Ability To Stay Long Enough
Hospitality fit-outs are expensive. You usually want enough lease term to:
- recover the fit-out cost;
- establish consistent revenue; and
- still have time left to actually make profit from the space.
Check:
- Initial term (e.g. 3 years, 6 years)
- Renewal rights (options to renew) and how/when you must give notice
- Conditions on renewal (for example, whether you must not be in breach)
- Demolition/redevelopment clauses that can allow early termination
Also be careful with informal assurances like “we’ll definitely renew you if things go well”. If it’s not in the lease, you may not be able to rely on it.
Outgoings And Other Ongoing Costs
Many tenants focus on base rent and get surprised by outgoings (operating expenses the tenant must contribute to). These can materially change the real cost of the premises.
Outgoings commonly include:
- rates and water rates
- building insurance
- common area cleaning and maintenance
- security, rubbish services, and pest control
- management fees
Ask for clarity on what’s included, what’s excluded, and whether there is any cap or estimate. You should also check whether the landlord can charge admin fees on top of outgoings.
Use Clause And Exclusivity
For a cafe or restaurant, the “use” clause matters more than people expect. It doesn’t just describe your business - it controls what you’re legally allowed to do in the premises.
You want the permitted use broad enough to cover realistic growth. For example, you may start as a cafe and later add catering, retail coffee beans, baked goods supply, or small events.
This is also where you check if you can operate as a “restaurant”, “cafe”, “bar”, “takeaway”, or a combination. If alcohol is part of the plan, you’ll also want the lease aligned with your licensing pathway.
It’s worth double-checking the permitted use wording because a tight use clause can restrict revenue streams you were counting on.
If you’re in a mall or hospitality precinct, consider whether you can negotiate some form of exclusivity (so the landlord can’t put the same concept right next door). It’s not always available, but it’s worth discussing if your concept is niche.
Fit-Outs, Repairs, And “Make Good” (Where Costs Blow Out)
This is the section that causes the most stress for hospitality tenants - because it’s where your big upfront spend sits, and where disputes often happen at the end of the lease.
Who Pays For What In The Fit-Out?
Before you sign, get clear on:
- Base build condition: is it a cold shell, existing cafe, or “as is”?
- Landlord works: is the landlord providing plumbing upgrades, grease trap, extraction ducting pathways, bathrooms, or fire compliance upgrades?
- Tenant works: what exactly are you responsible for installing?
- Approvals: who obtains building consent (if needed) and who pays the professional fees?
Even if you’re happy to pay for the fit-out, you still want the lease to support the reality of your build timeline - including access dates, trading delays, and what happens if consent takes longer than expected.
Alterations, Consents, And Landlord Approval
Most leases require landlord consent for alterations. For a cafe or restaurant, alterations aren’t optional - they’re usually the whole point.
Make sure you understand:
- the process for seeking consent (and whether the landlord can withhold it “at their absolute discretion”);
- whether you must use landlord-approved contractors;
- what documents you must provide (plans, engineer reports, producer statements, etc.); and
- whether the landlord can charge legal/administration fees for giving consent.
If the lease makes it hard or expensive to get approval, you can end up delayed, paying rent while you can’t open, or forced into a compromised layout.
Repairs And Maintenance (Especially For Hospitality Equipment)
Hospitality spaces often involve:
- extraction fans and ducting
- grease interceptors
- commercial refrigeration
- hot water systems and gas equipment
You’ll want to check whether any of these items are considered part of the landlord’s building services (landlord responsibility) or tenant’s fixtures (your responsibility). It’s not always obvious, and the difference can be thousands of dollars per year.
Make Good Clauses (End-Of-Lease Surprise Bills)
“Make good” is the obligation to return the premises in a specified condition when the lease ends.
Make good can range from reasonable (leave it clean and repair damage) to brutal (strip the premises back to bare shell, remove signage, remove ducting, patch and paint). For a restaurant, stripping can mean removing expensive fit-out items you hoped to sell or reuse.
Practical tip: document the condition at the start (photos + written condition report) and make sure the lease description matches what you’re actually taking.
Operational Dealbreakers: Hours, Access, Seating, And Compliance
Even if the rent is right and the fit-out is possible, some lease terms can quietly undermine day-to-day operations.
Trading Hours, Noise, Odours, And Building Rules
Some landlords (especially in mixed-use buildings) are sensitive about:
- early morning coffee trade;
- late-night service;
- music and events; and
- odours and extraction.
Make sure the lease and any building rules allow you to operate the hours you need, and that you can run extraction systems as required. If you’re planning a restaurant that relies on dinner trade, restrictions that suit an office tenant can be a real problem for you.
Outdoor Seating, Signage, And Footpath Use
Outdoor dining can be a major revenue driver, but it’s not always automatically included in a lease. You may need:
- a council licence/approval for footpath dining;
- clear landlord permission for tables/chairs in common areas; and
- signage rights (including sandwich boards, window signage, or fascia signage).
Don’t assume you can use the outdoor area just because it’s “right there”. Get it in writing.
Health And Safety Responsibilities
Under the Health and Safety at Work Act 2015, you’ll generally have duties as a PCBU (a person conducting a business or undertaking). In leased premises, responsibilities can overlap between landlord and tenant depending on who controls the area and the risk.
In plain terms: if something in the space can create risk to workers or customers (slips, unsafe wiring, poor ventilation, blocked exits), you want clear processes for reporting and fixing it - and you don’t want the lease to leave you paying for structural issues that the landlord should control.
Food, Alcohol, And Other Regulatory Realities
Your lease won’t replace your compliance obligations, but it can make them easier (or harder).
For cafes and restaurants, you should keep in mind:
- Food Act 2014 requirements (food control plans/national programmes, verification, hygiene and process control)
- Sale and Supply of Alcohol Act 2012 if you’re planning to serve alcohol (and whether the premises is suitable for licensing)
- Building Act 2004 considerations if your fit-out triggers building consent or affects fire safety systems
A common “gotcha” is signing a lease, then discovering the premises can’t practically meet requirements without major upgrades. A good due diligence process before signing is essential.
What Happens If Things Change? Assignment, Subleasing, And Ending The Lease
When you’re excited to open, it’s easy to think about the “start” and not the “exit”. But for hospitality, change is normal: you may outgrow the space, restructure, sell the business, or decide the location isn’t working.
So, you want to understand your options before you’re locked in.
Assignment And Selling Your Cafe Or Restaurant
If you ever plan to sell the business, the lease is a huge part of what you’re selling. Many buyers won’t proceed unless the lease can be assigned to them on workable terms.
Check:
- whether the landlord’s consent is required to assign (usually yes);
- what information you must provide about the buyer;
- whether the landlord can impose “reasonable conditions” (and what that means in practice); and
- whether you remain liable after assignment (for example, through guarantees).
If assignment is allowed, the process is often documented in a Deed of Assignment or similar documentation, so it’s worth understanding how that pathway works from the start.
Subleasing And Sharing Space
Some hospitality businesses reduce costs by subleasing part of the premises (for example, a dessert operator inside a larger restaurant, or a coffee counter within a shared venue). That can be a smart commercial move - but only if your lease allows it.
Look for:
- a clear right to sublease (or a process to get consent);
- any restrictions on the type of subtenant; and
- whether the landlord can charge fees for approving a sublease.
If subleasing is on the table, you’ll want the paperwork done properly, usually through a Commercial Sublease Agreement, so everyone understands who is responsible for what.
Early Termination, Break Clauses, And “What If We Can’t Trade?”
Many leases do not give tenants an easy right to end early. If you leave early anyway, you may still be liable for rent until a replacement tenant is found (and sometimes additional costs).
Consider whether you can negotiate:
- a break clause (a right to terminate at a certain point, sometimes with a fee);
- clear rules around what happens if the premises becomes unusable; and
- rent relief mechanisms for certain disruption events.
Where rent relief is negotiated, it’s usually documented carefully. Depending on the scenario, a Rent Abatement Agreement may be relevant.
Surrendering The Lease
If you need to exit and assignment/sublease isn’t workable, you may negotiate a lease surrender with the landlord. This is typically not automatic - it’s an agreement, often involving conditions (like payment, reinstatement, or timing).
It’s worth understanding the difference between “walking away” (usually a breach) and formally surrendering via a Lease Surrender Agreement, which can protect you from ongoing liability if done properly.
Key Takeaways
- A cafe or restaurant lease isn’t just about rent - it needs to support hospitality realities like extraction, plumbing capacity, seating, deliveries, and fit-out approvals.
- Make sure the key commercial terms work for your cashflow: rent review mechanics, outgoings, incentives, and a lease term long enough to recover your fit-out investment.
- Check the permitted use clause carefully so it matches what you want to do now and leaves room for realistic growth (like takeaway, catering, retail products, or events).
- Fit-out, repairs, and make good clauses are where costs often blow out - clarify who pays for upgrades and what condition you must return the premises in at the end.
- Think about your exit options from day one: assignment, subleasing, break clauses, and (if needed) a negotiated lease surrender.
- Because leases are long-term and high-stakes, it’s usually worth getting the terms reviewed before you sign - it’s much easier to negotiate upfront than fix issues later.
If you’d like help reviewing or negotiating your cafe or restaurant lease, we’re here to help. You can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
