A lease is the second-biggest commitment most restaurant owners ever make, after the staff payroll. Rent is the one fixed cost you can't trim on a slow Tuesday, and the wrong clause can quietly cost you tens of thousands of dollars at the end of a term you've already forgotten the detail of. With New Zealand hospitality closures running hot — and at least one well-known chain pushed into receivership by its landlord — the lease is no longer the boring document you skim before opening day.
This is a practical, pre-sign checklist for independent restaurant, cafe and takeaway owners. It is general information, not legal advice — but it will tell you exactly what to question before you put your name to a NZ commercial lease.
Key takeaways
- Rent only goes one way under a ratchet clause. The standard NZ lease lets a landlord tick a "ratchet" box so rent can't fall at review, even if the market drops. Find out which option is in your deed before you sign.
- "Outgoings" is real money. On top of base rent you'll usually pay a share of rates, insurance, building maintenance and management — budget for it, and get the inclusions listed.
- Make-good can be a five-figure surprise. At the end of the term you may have to strip out your fit-out and hand the premises back as you found them.
- A personal guarantee puts your own assets on the line. If you sign one, the company's limited liability won't protect you — and your home can be exposed.
- Aim for total occupancy cost (rent plus outgoings) around 6% of sales (Millé, 2023). Above that, the maths gets very hard once wages are added.
Why your lease is one of the riskiest things you'll sign
Hospitality is closing at pace. In the 12 months to mid-2026, 2,564 hospitality businesses shut their doors — 19% more than the 2,158 a year earlier (RNZ, 2026, citing Centrix data). Liquidations specifically rose to 414 in the past year, up 49% year on year, and the Restaurant Association estimates the average venue now lasts just 20–24 months (The Spinoff, 2026).
Rent sits right in the middle of that pressure. When Burger Burger — a six-store chain employing almost 90 people — went into receivership owing about $1.8 million, director Mimi Gilmour said the action was "triggered by a landlord calling in a loan and rent arrears" (NZ Herald, 2026). That's the sharp end of a lease that didn't leave any room to move.
The healthy target most operators work to is keeping total occupancy cost (rent plus outgoings) at around 6% of sales (Millé, 2023). That band matters because the other big number has already moved: wage costs across NZ hospitality have reached an average of 40% of businesses' spending — the first time the average has hit that level (Restaurant Association NZ via NZ Herald, 2025). With wages that high, an extra point or two of rent is the difference between a viable site and a slow bleed. The same margin pressure is why so many owners are also working hard to cut food costs — the lease is the other half of that equation.
How will the rent be reviewed — and is there a ratchet?
This is the clause that costs owners the most and gets read the least. A NZ commercial lease will set out how and when the rent changes. Under the standard form there are three review types: market rent (a valuer reassesses against comparable premises), CPI (rent moves with the Consumers Price Index), and — new in the current edition — a fixed-rent option agreed up front (Duncan Cotterill, 2024).
The part to interrogate is the ratchet clause. The standard lease offers "a menu of options including soft and hard ratchets, as well as customised 'caps and collars'" (Simpson Grierson, 2024). In plain terms:
- A hard ratchet means "rent cannot decrease below the rental set at the previous review, regardless of what a market review would otherwise produce" (NZ Legal, 2024). Rent can rise; it can never fall.
- A soft ratchet is the milder version — rent is held at the current level and can't drop below it, but you're not locked to an earlier, higher figure.
- A cap and collar sets an upper and lower limit on how far a review can move the rent in either direction — often the fairest outcome for a tenant.
Before you sign, ask the agent or landlord one direct question: which review type and which ratchet option are ticked in this deed? If it's a hard ratchet on a market review, you carry all the downside risk of a falling market while the landlord keeps all the upside. That's negotiable — push for a cap and collar, or at least a soft ratchet, and get any market-review dispute mechanism (usually arbitration) confirmed in writing.
What does "outgoings" actually include?
Base rent is only part of what you'll pay. Outgoings — sometimes called "additional rent" — are your share of the costs of running the building: council rates, building insurance, structural and common-area maintenance, and often a management fee. On a multi-tenant building these are apportioned, and they can add a meaningful percentage on top of base rent.
Two things to check: first, get the full list of inclusions in writing, because the current standard lease updated its outgoings provisions to give "a more comprehensive list of inclusions" (Duncan Cotterill, 2024) — so what's covered varies by deed. Second, ask for the actual outgoings figure from the last 12 months, not an estimate. Then add it to your base rent and test it against that 6%-of-sales band before you commit.
What are you on the hook for at the end? The make-good clause
This is the surprise that catches owners hardest. A make-good (or reinstatement) clause requires you to hand the premises back roughly as you found them. As one NZ firm puts it, at the end of a commercial lease "the tenant is obliged to hand back the premises to the landlord in the condition they were in at the commencement date, save for fair wear and tear" — and if you've made alterations, the landlord "can usually require the tenant to remove them, reinstate the premises to their previous layout and repair any resulting damage" (Hesketh Henry, 2025).
For a restaurant, that's not trivial. Your commercial kitchen, extraction, grease traps, cool rooms, plumbing and bespoke fit-out may all have to come out. The same firm warns the cost "can be significant, and it can come as an unwelcome surprise for many tenants at an already stressful time of exiting premises and setting up new ones" (Hesketh Henry, 2025).
How to protect yourself before signing:
- Ask whether make-good is required at all, or whether the landlord would prefer to keep the fit-out (sometimes a landlord values an existing commercial kitchen and will waive reinstatement).
- Negotiate a clear scope so you're not arguing about it years later.
- Where you can, design with exit in mind — movable equipment over built-ins.
One useful change in the current lease: if a lease ends because of partial destruction of the building, the tenant is no longer obligated to make good, and reinstatement is now to a standard "reasonably adequate for the Tenant's occupation and business use" (Simpson Grierson, 2024).
Have you signed a personal guarantee — and is your home exposed?
If you sign your lease through a company, limited liability is supposed to keep your personal assets separate from the business. A personal guarantee removes that protection for the landlord. If the company can't pay the rent, the guarantor pays it personally — and that exposure can reach your savings and even your family home.
The current standard lease now offers landlords two alternatives to a personal guarantee: a bank guarantee from a New Zealand registered trading bank, or a rental bond similar to a residential tenancy bond, "with the default amount being three months' rent" (Duncan Cotterill, 2024). If a personal guarantee is on the table, ask whether a bond or bank guarantee would satisfy the landlord instead — it caps your exposure to a known figure rather than your whole net worth. We've covered the downside in detail in what happens to your family home if your restaurant fails; read it before you sign any guarantee.
Is your intended use permitted — and can you get the consents?
A lease specifies a permitted use. If it says "cafe" and you want to add a late-night bar or a commercial kitchen for delivery, you may be in breach — or need the landlord's consent and a council resource consent. Outdoor seating, signage, extraction and trading hours can all need separate council approval that varies by region. Confirm the permitted use covers exactly what you plan to do, and that the premises can be consented for it, before you sign — not after you've paid the deposit.
Can you get out if you need to? Assignment and subletting
No one signs a lease planning to leave early, but the average venue lasts under two years, so plan for it. Check the assignment and subletting clause: can you transfer the lease to a buyer if you sell the business, or sublet part of the space? Most leases allow it with the landlord's consent, which "shall not be unreasonably withheld" — but the terms matter, because a lease you can't exit or transfer is a liability you carry even after the doors close. This is the same trap that turns a struggling site into unmanageable tax and rent debt.
The 2024 standard lease: what changed
Most NZ commercial premises are leased on the Deed of Lease, Seventh Edition 2024, released by The Law Association of New Zealand (formerly ADLS) in November 2024. It replaced the Sixth Edition, which had been the standard since 2012 (Duncan Cotterill, 2024). The headline changes for tenants:
- A fixed-rent review option alongside market and CPI reviews, plus the ability to set caps and collars and an interim rent while a market rent is being determined (Duncan Cotterill, 2024).
- An expanded menu of ratchet options — soft, hard, and customised caps and collars (Simpson Grierson, 2024).
- Bank guarantee and rental bond alternatives to a personal guarantee (Duncan Cotterill, 2024).
- Reinstatement and make-good obligations reorganised into their own clause, but kept in full where the landlord requires them (Duncan Cotterill, 2024).
Knowing it's the Seventh Edition tells you the options exist; it doesn't tell you which boxes the landlord has ticked. That's the whole job of your pre-sign read.
When margins are this tight, every dollar matters — which is why owners increasingly keep an ordering channel they control rather than handing every sale to a third party. A simple direct-ordering site (the kind DineHere builds from a menu photo) is one way to protect the margin your rent is eating into. But the lease comes first: get it right before you spend a cent on fit-out.
Get the deed reviewed before you sign
Spending a few hundred dollars on a commercial property lawyer to review the deed before you sign is the cheapest insurance in hospitality. Have them check the ratchet option, the review schedule, the outgoings inclusions, the make-good scope, any personal guarantee, the permitted use and the exit terms. A short review now is far cheaper than a make-good dispute or a ratcheted rent later.
Frequently asked questions
What is a ratchet clause in a NZ commercial lease?
A ratchet clause stops the rent from falling at a review. A hard ratchet means rent can never go below the figure set at the previous review, even if the market has dropped (NZ Legal, 2024). A soft ratchet holds rent at the current level, and a cap and collar limits movement in both directions. Always check which option is in your deed.
How often is rent reviewed under the standard lease?
It depends on what's negotiated in your deed, but reviews are commonly every one to two years, with a market rent review at each renewal. The Seventh Edition 2024 lease allows market, CPI or fixed-rent reviews (Duncan Cotterill, 2024) — confirm both the type and the timing before you sign.
What are "outgoings" or "additional rent"?
Outgoings are your share of the costs of running the building — council rates, building insurance, structural maintenance, common-area costs and often a management fee — paid on top of base rent. The Seventh Edition updated its list of inclusions, so get the exact items and the last year's actual figure in writing (Duncan Cotterill, 2024).
What is a make-good clause and what can it cost?
Make-good (reinstatement) requires you to return the premises to their commencement-date condition, save fair wear and tear, removing your alterations and repairing damage (Hesketh Henry, 2025). For a restaurant with a fitted kitchen this can run into five figures, so the same firm warns it "can be significant, and it can come as an unwelcome surprise."
Can I avoid signing a personal guarantee?
Sometimes. The Seventh Edition 2024 lease offers landlords two alternatives — a bank guarantee from a NZ registered trading bank, or a rental bond, "with the default amount being three months' rent" (Duncan Cotterill, 2024). Ask whether one of these would satisfy the landlord instead of a personal guarantee.
Can a landlord put my house at risk?
Only if you give them a way to reach your personal assets — most commonly by signing a personal guarantee. A guarantee survives the company's failure and is enforced against you personally, which can expose savings and your home. See what happens to your family home if your restaurant fails.
What occupancy cost can a NZ restaurant afford?
A common rule of thumb is keeping total occupancy cost (rent plus outgoings) at around 6% of sales (Millé, 2023). With wages averaging 40% of spending across NZ hospitality (NZ Herald, 2025), occupancy cost much above that band squeezes the margin hard.
Can I sell my business and transfer the lease?
Usually yes, via an assignment clause, but you'll need the landlord's consent (commonly "not to be unreasonably withheld"). Check the assignment and subletting terms before you sign, because a lease you can't transfer makes your business much harder to sell.
What is the Deed of Lease Seventh Edition 2024?
It's the current standard NZ commercial lease form, released by The Law Association of New Zealand in November 2024, replacing the Sixth Edition that had been standard since 2012 (Duncan Cotterill, 2024). Most NZ commercial premises are now leased on this form.
Do I really need a lawyer to review a lease?
For the cost — usually a few hundred dollars — a commercial property lawyer's review is cheap insurance against a clause that could cost you tens of thousands later. Have them check the ratchet, rent review, outgoings, make-good, any personal guarantee, permitted use and exit terms before you sign.
This article is general information for New Zealand hospitality owners and is not legal advice. Commercial leases are individually negotiated — get your specific deed reviewed by a qualified New Zealand commercial property lawyer before signing.
