What to Look for in a New York Lease if You’re Opening a Restaurant or Bar

Key terms, hidden risks, and deal-breakers for food and beverage operators

Signing a commercial lease is one of the biggest commitments you’ll make as a restaurant or bar owner. The right lease can set you up for long-term success. The wrong one can put you out of business or make profit margins so low it is hard to squeak out a decent living.

Here’s a practical guide to help you understand what matters most in a New York restaurant or bar lease.

1. Use and Occupancy Clauses

Your lease must clearly allow you to operate a restaurant or bar and serve alcohol.

• Make sure the lease’s permitted “use” is broad enough to cover your current concept and future menu or format changes. This is important if you plan to acquire a liquor license as they require appropriate use clauses. Also consider it being broad enough that you are not severely limited when you go to sell the business or assign the lease to a new operator with a different food concept.
• Verify zoning compliance and that the landlord permits alcohol service. Just because prior operators did it does not mean you will be able to do so automatically.
• If you plan to host live music, entertainment, or outdoor seating, make sure those uses are included. Find out if you need additional permits and if so, what conditions might be tied to them (especially hours of operation for exterior seating or the requirement to remove tables and chairs every night from sidewalk café seating).

2. Liquor License, Business Acquisition and Municipal Contingencies

In New York, you can’t legally serve alcohol without a license from the State Liquor Authority (SLA). If you manufacture alcohol (wineries and brewpubs), you may additionally need federal TTB permits. In some cities like New York City, you may additionally need approvals from community boards and other government agencies (business permit, historic district compliance, health permits and outside seating or parking permits). 

If you are buying the existing business in the space, your lease can’t start until the closing and transfer of title to you. You will need a contingency that you are not bound by the lease if closing does not take place.

• Negotiate a liquor license contingency and one for any other permits or consents you will need to operate your business—the right to cancel the lease (or delay rent) if your license is denied or delayed.
• Make sure the landlord will cooperate in providing required documents for your application. Some applications may require the landlord to be a co-applicant as it is owns he affected property.

3. Build-Out and Renovations

Most restaurants and bars require significant renovations to meet building, fire and health codes and create your vision.

• Clarify who pays for build-outs and whether the landlord offers a tenant improvement allowance.
• Ensure the lease gives you enough time for construction before rent starts. Plan for the inevitable delays.
• Confirm you can make necessary modifications to plumbing, ventilation, and electrical systems, especially if installing new appliances and equipment or walk-in coolers.

4. Hours of Operation

Some leases restrict operating hours—especially in mixed-use buildings and neighborhoods.

• Ensure permitted hours match your business model (late-night service, brunch, etc.).
• If you want flexibility for special events (holidays, parades and festivals), make sure it’s in writing.
• Some leases restrict delivery drivers/bikes, so be sure the lease meets your needs for your business model.
• Some leases require outside security guards to control crowds and those standing in line to enter if you typically have a waiting list. Understand those requirements and potential costs to your business.

5. Rent and Additional Charges

Restaurant leases often include triple net (NNN) charges—taxes, insurance, and maintenance—on top of base rent.

• Understand exactly what you’ll pay monthly and annually. Look into utility costs, grease trap cleaning, HVAC maintenance and extermination contract requirements, and refuse charges as these often are not included in the common area maintenance.
• Watch for vague “common area maintenance” (CAM) fees—ask for caps or detailed breakdowns. Some landlord include paying for their own office staff and a 10-15% upcharge on any bills they pay and pass on to the tenants.
• Ask about scheduled rent increases and anticipated maintenance (like roof or parking lot replacement) and tie them to realistic sales growth.

6. Exclusivity Clause

Protect your market by negotiating an exclusive use provision so the landlord can’t lease space in the same property  (or nearby properties if it also owns those) to another bar or restaurant with your same concept. Competition will be stiff with two pizzerias or Mexican eateries in the same plaza. These often have to be carefully written to provide exceptions for common menu items common to most bars and restaurants like burgers, wings, nachos or chicken tenders. 

7. Assignment and Subletting

Your lease should allow you to assign (transfer) the lease or sublet the space if you sell the business.

• Many landlords require their approval, so negotiate “reasonable consent” language.
• Without this right, selling your restaurant could be much harder as the new owner would have to relocate and the costs might make the purchase uninviting.

8. Personal Guarantees

Many NY landlords require small business tenants to personally guarantee rent payments.

• Try to limit the guarantee to a set number of months after default.
• If you are in New York City, try to negotiate a “good guy” guarantee, which ends liability once you vacate and return the space in good condition. While possible, these are not common outside New York City.
• Try to negotiate that the personal guarantor will be substituted upon assignment and sublease, removing you from further potential liability. This is not always possible, but great if you can get such a clause.

9. Compliance with Health and Safety Regulations

You’ll be responsible for meeting health code, fire safety, ADA, and building code requirements.

• Ensure the building has adequate HVAC, grease traps, exhaust hoods, and fire suppression systems—or negotiate for the landlord to install them.

10. Renewal and Exit Options

A restaurant lease is often 5–10 years—you need a clear plan for what happens when it ends.

• Secure renewal options at pre-agreed rent terms. This ensures you won’t need to relocate because the landlord won’t renew (there may be a new landlord if the property is sold) and avoids unexpected rent increases.
• Negotiate early termination rights in case of major business changes. This is not always possible, but great if you can get such a clause.

11. Red Flags for Restaurant & Bar Leases

• No liquor license or other contingencies.
• Strict “as is” clauses where the landlord will not make any repairs before turning over possession to you.
• Current or past tenant cite the landlord as a reason they are leaving. (Talk to other tenants and ask about how it is to work with the landlord.)
• Landlord unwilling to confirm permitted use for alcohol service.
• Vague or open-ended CAM charges.
• Strict assignment rules that prevent you from selling the business or changing ownership by taking on new investors or family member co-owners.
• No allowance or flexibility for build-out time.

Final Thought

Your lease is more than a rent agreement—it’s the foundation of your entire restaurant or bar business. A well-negotiated lease protects your investment, gives you flexibility to adapt, and ensures you can legally operate the way you envision.

In New York, the hospitality business is competitive and heavily regulated—having an attorney who understands restaurant and bar leases can mean the difference between thriving and closing early.

 

Tracy Jong is a Senior attorney at Evans Fox LLP with 30 years of experience focusing her practice in business law, intellectual property and licensing for alcohol and cannabis. Tracy Jong is a member of the New York Bar and is a registered attorney at the United States Patent and Trademark Office. She can be reached at Tjong@EvansFox.com.

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The content has been prepared for informational purposes only; it should not be construed as legal advice, does not create or constitute an attorney-client relationship, and readers should not act upon it without seeking professional counsel.