2. Lease Conditions: Understand the Fine Print

Always have a solicitor review the lease. However, here are a few key terms to be aware of:

• Rent Increases: Are they fixed, CPI-based, or subject to market reviews every few years?
• Market Rent Reviews: Can the rent be reset to reflect market conditions?
• Repairs and Maintenance: What’s your responsibility versus the landlord’s?
• Extension Options: Can you negotiate additional lease terms if you invest in upgrades or improvements?

3. Rent vs Turnover: Is It Sustainable?

It’s essential to benchmark your rent as a percentage of turnover. For example:

• A lease costing 25% of business turnover may be unsustainable.
• Some industries average 10% – 15%; others may be higher.
• High rent could be a red flag or an opportunity if the current business is underperforming and you can turn it around.

Understanding what’s normal for your industry is critical in determining if the lease terms are fair.

4. The Property: Is It Fit for Purpose?

Even though you don’t own the land, the state of the property matters. Ask yourself:

• Does the property need refurbishment?
• Are the buildings up to code? (e.g. safety features, pool fencing, disability access)
• Has the landlord kept things in good order?

Always commission a building and pest inspection, especially if you’re buying into a business like a motel, childcare centre, or café.

Buying a leasehold without understanding your repair obligations or the property’s condition can lead to unexpected costs. Our team can help you review lease clauses and capital risk before you commit.

5. Even though you don’t own the land, the state of the property matters. Ask yourself: 

• Does the property need refurbishment? 
• Are the buildings up to code? (e.g. safety features, pool fencing, disability access) 
• Has the landlord kept things in good order? 

Always commission a building and pest inspection, especially if you’re buying into a business like a motel, childcare centre, or café. 

Buying a leasehold without understanding your repair obligations or the property’s condition can lead to unexpected costs. Our team can help you review lease clauses and capital risk before you commit. 

Your relationship with the landlord is important. After all, you’re building a business on their land. We recommend: 

• Meeting the landlord early in the process. 
• Sharing your vision and future plans. 
• Looking for flexibility — e.g. lease extensions or contribution to upgrades. 

A cooperative landlord can be a valuable partner in helping your business succeed. 

6. Location: What’s Changing Around You? 

Location is everything in a leasehold. Because you’re tied to the premises, changes in the local area can make or break the business:

• Is there new infrastructure planned that may divert traffic away or toward you?
• Are competitors moving into the area?
• Are key local attractions (which drive your business) shutting down or expanding?

Due diligence isn’t just about the business it’s about the neighbourhood too.

7. Equipment, Fixtures, and Fittings

You’re likely buying a business that’s already fitted out. But that doesn’t mean it’s in great shape. 

Check: 

• Is all plant and equipment in good working order? 
• Are any major upgrades required? 
• Do any items need to be replaced immediately? 
• Are fixtures and fittings still compliant and presentable? 

This can significantly affect your upfront investment and should factor into price negotiations. 

8. Financial Performance: What’s Under the Hood?

This is where your accountant becomes invaluable. 

• Obtain at least three years of financials. 
• Have your accountant calculate an adjusted net profit. 
• Compare it to industry benchmarks and similar businesses recently sold. 

At Rogerson Kenny, we help buyers assess the true earning potential of leasehold businesses and avoid overpaying for goodwill that isn’t backed by numbers.

9. Finance: How Much Can You Borrow? 

Banks generally lend up to 50% of the leasehold’s value. For example: 

• If the vendor is asking $1,000,000 for the leasehold, you may be able to borrow up to $500,000 assuming strong financials and security. 

You’ll need to fund the rest via equity or alternate finance, so ensure your financial structure is clear upfront. 

Leasehold finance is more specialised than general business loans. We help clients prepare lender-ready documents and structure deals that work. 

10. Other Key Considerations 

• Stamp Duty: In some states, stamp duty applies to leasehold purchases and/or plant & equipment. 

• Value Split: Ensure you’re comfortable with how the sale price is allocated between goodwill and plant/equipment. This has tax implications and affects depreciation benefits. 

• Legal Advice: Always get contracts and lease documents reviewed by a solicitor who understands commercial leasing. 

Final Thoughts

Buying a leasehold business isn’t just about securing a good location or negotiating the rent it’s about protecting your long-term investment. Every clause in the lease, every figure in the financials, and every term in the finance deal matters. The difference between a thriving, profitable business and a costly mistake often comes down to the depth of due diligence and the quality of advice you receive.

At Rogerson Kenny, we’ve guided hundreds of clients through leasehold purchases across hospitality, accommodation, and service industries. We know the red flags to look for, the benchmarks to test, and the finance structures that get deals over the line.

Ready to move forward with confidence? Book a call with our team today and let’s make sure your next leasehold business is a smart investment, not a gamble.