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How well do you know your lease?

 

The most common form of commercial lease used in New Zealand is the Auckland District Law Society deed of lease (Lease). Whether you are a tenant or landlord, it is important that you understand your rights and obligations under the Lease.

Rent review

It is crucial that the rent review process in the Lease is followed.  If you are served with written notice proposing a new annual rent and do not respond within 20 working days, you are deemed to have accepted the rent proposed.  As a tenant, you need to be aware that the rent can never fall below the rent payable at the commencement date.

Tenant’s maintenance obligations

Unlike residential tenancies, tenants have an obligation to maintain the interior of the premises.  The landlord can require the tenant to repaint the interior of the premises when reasonably required.  The landlord can also require that all floor coverings are replaced by the tenant when reasonably required (fair wear and tear excepted). 

Alterations to premises

Any alterations made by the tenant prior to the commencement date of the Lease or during the term of the Lease must, if required by the landlord, be reinstated by the tenant.  This can be a costly exercise.

Liability on assignment of your lease

If a tenant transfers the Lease to another tenant, the original tenant (and any guarantor of the tenant) remains liable to the landlord until the end of the Lease term.

Security

A personal guarantee is the only security provided in the Lease.  Landlords should consider whether any additional security should be inserted, such as a bank guarantee.

Termination of lease

If a landlord terminates the Lease, the tenant has 3 months to apply to the Court for relief to have the termination set aside.   If the default is remedied (especially in the case of arrears of rent) the Court will generally grant relief and set aside the termination.  An outgoing tenant’s right to seek relief needs to be dealt with in an agreement to lease with a new tenant.

The Auckland District Law Society lease can and should be varied to meet the bargain struck between the landlord and tenant.  When dealing with commercial tenancies, it is important that you seek advice from one of our property law experts.