Where a person operates a business from the land and buildings but does not own them. Mostly the chattels are owned by the business owner and the tenure is secured by a lease - normally 20-30 years in length with an annual rental payable to the “Freehold Investment” owner.
Purchasing a motel, hotel or tourist park lease is, for many, a very attractive and more affordable alternative to making the substantial commitment required for freehold ownership. Over 70% of motels in New Zealand are now owned by two parties; a commercial property investor and an operator. Buying a lease offers higher return on investment and a much lower entry price than freehold purchase. Because you don’t have to fund the real estate component, you have a choice of larger, higher quality properties. Often resale is also easier, given more buyers can afford to buy a lease than can fund a freehold purchase.
The business operator or lessee, under the standard lease model, purchases the business including chattels (all moveable items required to run a business, e.g. furniture, decor, soft furnishings, bar and office equipment), benefit of the lease term, and goodwill.
The lessee is responsible for the maintenance and replacement of chattels as necessary to maintain the goodwill of the business. They are also responsible for paying the rates and insurance and for day-to-day repairs and maintenance of the land and buildings. Allow for these expenses when considering your purchase.
Under the lease, the landlord (lessor) is responsible for structural repairs and replacement of fixed items of equipment when required. The lessee pays the landlord an agreed annual rental which represents a commercial return on their property investment.
As leasehold owner, the business is yours to market, manage, and build for maximum profit and growth. The more business you generate, the more you earn and the more your business is worth for future resale.
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