When an accommodation business operates from leased premises, the lease is not simply another document in the sale file.

It can be central to the transaction.

For a Melbourne hotel, motel or other accommodation-business owner considering a leasehold sale, understanding the remaining term, rent structure, options and transfer provisions before marketing can prevent major questions appearing late in negotiations.

Start With the Complete Lease

The seller and their solicitor should review the executed lease together with every variation, extension, side agreement and other document affecting the tenancy.

Do not rely solely on a summary prepared years earlier.

A buyer will need to understand the actual legal position.

Confirm the Remaining Term and Options

A purchaser needs to know how long they may be able to operate from the premises.

The current expiry date and any options should therefore be clearly identified.

If an option has conditions attached to it, those conditions matter.

Sellers should avoid representing a future extension as guaranteed unless the documents and professional advice support that statement.

Explain Rent and Outgoings

Buyers evaluating a leasehold accommodation business will examine the occupancy cost.

Prepare an accurate schedule showing current rent and relevant outgoings, together with the review mechanism provided in the lease.

If there are unusual incentives, abatements or other arrangements, these should be identified rather than hidden within the accounts.

Understand Assignment Requirements

Selling the business may require the premises lease to be transferred or assigned to the purchaser.

Business Victoria recommends that commercial tenants understand assignment provisions and obtain appropriate advice when selling a business.

Where Victoria's retail leasing legislation applies to the particular premises, additional statutory procedures may be relevant to assignment. Whether that regime applies to a particular accommodation property should be confirmed by the parties' solicitors rather than assumed.

Prepare the Purchaser for Landlord Review

A lease may require information about the incoming operator before consent is provided.

A properly qualified purchaser should therefore be prepared to provide the necessary business and financial information through the appropriate legal process.

This is another reason why buyer qualification matters in a leasehold sale.

Finding a buyer who can pay the purchase price is only one part of completing the transaction.

Check Repair and Handover Obligations

Maintenance, refurbishment and make-good obligations should also be reviewed.

If the lease requires particular work during or at the end of the tenancy, a purchaser needs to understand those commitments.

Sellers should obtain legal advice rather than making informal interpretations.

The Lease and the Business Need to Work Together

Victoria's accommodation sector remains a major commercial industry, with 16.6 million room nights occupied across properties with ten or more rooms in 2024–25.

For an individual Melbourne leasehold business, however, buyer interest still depends on the specific economics of the operation and its lease.

Norton’s Resort Brokers can assist accommodation owners with structuring the commercial sale process while working alongside their legal and accounting advisers.

Frequently Asked Questions

Is a longer lease always better?

Not automatically. Buyers may consider term, rent, reviews, obligations, options and business performance together.

Does the landlord need to approve a buyer?

The position depends on the lease and applicable law. Sellers should obtain legal advice about the specific assignment process.

Should I negotiate a lease extension before selling?

That depends on the existing term, buyer market and commercial circumstances. Obtain advice before committing to a strategy.

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Disclaimer: General information only and not legal advice. Leasing legislation and contractual requirements vary between properties. Obtain independent legal, accounting, valuation and financial advice.