Lease restructuring
Hospitality
Hamilton, NZ
How a Hamilton restaurant reset an inherited lease and cut rent by 20%
The result
$47,619
cut from the annual rent, plus the compounding CPI increases that will no longer apply.
Four terms reset in the tenant’s favour on an inherited restaurant lease: a lower base rent, market rent reviews in place of automatic CPI rises, a clean exit route for the guarantors, and almost 12 more years of secure tenure.
At a glance
Client
Lone Star Rototuna
Sector
Hospitality — restaurant and bar
Location
Hamilton, New Zealand
Service
Lease restructuring
The brief
Reset an inherited lease locked into automatic CPI rent rises, with no market test and no exit route for the guarantors.
The situation
An inherited lease, still running on someone else's terms
The current franchisees took over Lone Star Rototuna, by taking an assignment of a lease first signed back in September 2014. The lease came with the site. It also came with more than a decade of someone else's terms.
The rent review had never been tested against the market. Every two years it moved by CPI only, and a ratchet clause meant it could only go up. Whatever the market outside the building was doing, the rent inside kept climbing.
What was at stake
Twelve more years of a rent that only ever moved one way
The passing rent stood at $233,619.20 a year, plus GST, with around 12 years left on the term. Locked into CPI reviews every two years, each one compounding on the last, with no mechanism to ever bring the rent back toward what the site was actually worth.
There was a second exposure sitting underneath the rent. The two guarantors behind the lease, had signed on personally when they took the assignment, the standard price of stepping into someone else's deal. As the lease stood, there was no route out of that guarantee. Sell the business or step back, and the personal liability could keep following them.
For a single-site hospitality operator, that isn't one bad lease. It's over a decade of guaranteed cost growth, with two people personally exposed for as long as the lease runs.
What we did
Test the rent, then negotiate the whole deal
The franchisees brought in Marcus from Proactive Property Group, a tenant-side adviser who works the full lease lifecycle, not just the negotiation on the day. The job: reset a lease that had drifted years out of alignment with the market.
01
Benchmark the rent
Reviewed the inherited 2014 deed clause by clause and benchmarked the $233,619.20 passing rent against comparable Hamilton hospitality premises.
02
Rebuild the review mechanism
Took the market evidence to the landlord and argued for three-yearly market rent reviews in place of the automatic two-yearly CPI increases.
03
Negotiate an exit for the guarantors
Secured a right for the franchisees to be released from personal liability on any future assignment, provided the incoming tenant offers acceptable replacement security.
04
Reset the whole deal in a new deed
Papered the rent, the review mechanism, the guarantee terms and a fresh 15-year term into a single new deed, with the 2014 lease formally surrendered.
The result
A lease that finally moves with the market, not against the tenant
The restructured deal landed five terms in the franchisees favour:
$47,619 a year back
Annual rent dropped from $233,619.20 to $186,000, plus GST, just over 20% off from day one of the new deed.
No more automatic ratchet
Reviews now happen every three years against real market rent, not an automatic CPI rise every two years.
A clean way out for the guarantors
The franchisees can be released from personal liability if the business is ever assigned on.
Nearly 12 more years of security
Final expiry moved from 23 March 2037 to 30 November 2048, on a fresh 15-year term.
One clean deed, not a patchwork
Every term sits in a single new document, with the 2014 lease formally surrendered.
That review-mechanism change is where the real money sits. Two more CPI reviews would have landed before the old lease even reached its next renewal date, each one compounding on the last. Neither will happen now.
If you're facing the same thing
A lot of hospitality operators end up with a lease they didn't negotiate themselves, inherited when they bought the business, signed by someone else years before. The rent review keeps moving and nobody's ever asked whether it still reflects the market. The only way to find out is to test it, before the next review date arrives on its own.
About the adviser
Marcus Bosch
Marcus has spent 20 years acting for tenants across New Zealand and the East Coast of Australia — finding premises, negotiating leases and managing property costs across the full lease lifecycle. Having sat on both sides of the table as landlord and tenant, he negotiates commercial terms most tenants only sign once or twice in the life of their business.
More about Marcus and Proactive Property Group →
More proof
Related case studies
$47,619 a year cut from an inherited Hamilton restaurant lease
Four terms reset in the tenant’s favour on an inherited restaurant lease: a lower base rent, market rent reviews in place of automatic CPI rises, a clean exit route for the guarantors, and almost 12 more years of secure tenure.
This was a lease restructuring. It's one stage of our commercial lease advisory Services.
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Running on a lease you didn't negotiate?
Don't let an automatic rent review keep compounding in the landlord's favour. Tell me about the lease and I'll show you what's actually on the table, before the next review date locks in another increase.