When a commercial space or an operating business changes hands in New York City, the deal rarely fits the simple “buy a building, sell a building” mold. Instead, value moves through a mix of key money, fixtures, business assets, and a lease assignment — and how you structure the transaction determines what you can sell, what you can collect, and whether the landlord even allows it. Here is how these pieces fit together for owners of commercial spaces and businesses.
What key money is
Key money is a payment an incoming operator makes for the right to take over an existing, built-out commercial space — typically one with an attractive location, a desirable lease, and a buildout already in place. It is not rent and it is not a security deposit; it is consideration paid for the value of stepping into a turnkey situation.
In practice, key money compensates the outgoing party for things that are hard to replicate: a below-market or favorable lease, an established location, existing fixtures and improvements, and the time and cost the new operator avoids by not building out from scratch. It is most common in restaurants, retail, and other storefront uses where the buildout and foot traffic carry real value.
Selling business assets vs. a lease assignment vs. a key-money deal
These three structures often overlap, but they are distinct, and it helps to keep them separate when you negotiate:
- Selling business assets. You sell the tangible and intangible property of the business — equipment, furniture, fixtures, and equipment (FF&E), inventory, and sometimes goodwill, trade name, licenses, or customer relationships. This is a sale of what the business owns and runs on.
- Lease assignment. You transfer your rights and obligations under the existing lease to a new tenant, who steps into your shoes for the remaining term. This is a sale of your right to occupy the space.
- Key-money deal. The incoming operator pays for the package — the space, the fixtures, and the lease position — bundled together. Key money is the price of that combined opportunity, often layered on top of an asset purchase.
Most real transactions blend these. A departing restaurateur, for example, might assign the lease, sell the FF&E and inventory, and receive key money for the location and buildout — all in one deal.
How operating assets are valued
Valuing what changes hands is part appraisal and part negotiation. The components are weighed differently:
- Equipment and FF&E are typically valued at depreciated or fair market value — what comparable used assets would fetch, adjusted for condition and whether they convey in working order.
- Inventory is usually counted and priced at or near cost, often verified close to closing.
- The lease position carries value when the rent is below market or the remaining term and renewal options are favorable; an at-market or above-market lease adds little and can even be a drag.
- Goodwill and intangibles — established traffic, reputation, licenses, transferable permits — are the softest to price and the most negotiated, and they often show up bundled into the key-money figure.
A clean deal allocates the total purchase price across these categories in writing, because the allocation affects both parties’ tax treatment and clarifies exactly what is being bought.
Why landlord consent to assignment is the pivotal step
None of this happens in a vacuum: nearly every commercial lease requires landlord consent to assign the lease or sublet the space, and that consent is the hinge the whole transaction turns on. A lease typically provides that consent will not be “unreasonably withheld,” but landlords still scrutinize the incoming tenant.
Expect the landlord to evaluate the new operator’s financial strength, business experience, and intended use, and to confirm the use is permitted under the lease. The landlord may also seek to capture some of the upside or update terms — for example, asking for a share of the key money or assignment profit, a higher rent or fresh security, an updated personal guaranty, or modernized lease provisions as a condition of signing off. Because consent can take time and is rarely automatic, it should be addressed early; a signed asset deal means little if the assignment never clears the landlord.
How these deals pair with a lease
In most storefront and commercial transactions, the lease is the spine that the rest of the deal hangs on. The buyer is not just acquiring equipment and inventory — they are acquiring the right to operate in that space, which only the lease (and the landlord’s consent) can deliver.
That is why these elements are usually negotiated together: the purchase of business assets, the payment of key money, and the assignment of the lease are interdependent, and each is typically made contingent on the others closing. Owners sometimes find that landlord consent is the real gating item, and that the cleanest path is a new direct lease between the landlord and the incoming operator rather than an assignment — a structure worth weighing depending on the landlord’s preferences and the condition of the existing lease.
Bottom line
Key money, business-asset sales, and lease assignments are three ways of moving the same underlying value — a built-out, leased, operating space — and most NYC deals combine them. The keys to a clean transaction are knowing exactly which assets you are selling, valuing them honestly, allocating the price in writing, and securing landlord consent early, because the lease is what makes the rest of the deal real.
This article is for general informational purposes and is not legal, tax, or financial advice. Rules change and the specifics vary by property — consult a qualified professional about your situation.