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CML08

Commercial Leases

NZ $50.00
incl GST
Author(s): David Grinlinton, Ish Fraser, Jacqui Sibbald
Published: 29 April, 2008
Pages: 114

   

Introduction


The first New Zealand Law Society seminar on leases took place in 1990. One of its purposes was to introduce to the profession the new ADLS Form of Lease. This seminar attracted large numbers of the profession, driven in part by the landlord and tenant issues arising out of the property crash. The first seminar has been followed by two other Law Society leasing seminars, each focussing on relevant landlord and tenant issues at the time the seminars were presented. Many of the contentious issues of the 90’s have to a large extent been resolved by the courts, and re-drafted lease provisions. Issues such as those relating to ratchet clauses and the liability of tenants and guarantors have largely been settled.

The ADLS Lease Form has been widely accepted throughout New Zealand for most commercial leasing transactions. This has arisen largely for two reasons.

First, our familiarity with a standard lease form avoids many of the endless arguments between landlord and tenant as to the acceptability or otherwise of many lease terms. This reduces time spent on the leasing transaction with a consequential reduction in legal and other costs.

Secondly, the form itself is, in general terms, a fair lease between the landlord and tenant. At the time it was introduced it set a new level in fairness. Prior to that tenants were placed in the position of largely accepting the form of lease adopted by landlords lawyers. The most recent edition of the ADLS Lease Form has taken the fairness a step further by introducing a rent review clause that allows either party to commence a rent review on a review date, with the ratchet provision only relating to the commencement rental under the lease.

In many respects, the lease contract is one of the most important contracts dealt with by property lawyers. Many transactions we deal with relate to a finite period of time with a consequential reduction of risk to the parties and to ourselves as lawyers. A sale and purchase transaction is a good example. A purchase transaction generally takes place over a period of one month, the purchase is settled and that generally is the end of the matter. The practitioners responsibility and risk is to a large degree limited by the time frame of the transaction.

With the lease contract however, the lease is on foot for a lengthy period of time. It subsists for the term of the lease and its renewals. There is always a danger that contentious issues will arise over the currency of the lease. A positive relationship between a landlord and tenant at the commencement of a lease may dramatically change after a sale of the property by the landlord, or on assignment of the lease by the tenant with the introduction of a new party to the legal relationship.

It is important therefore that leases are treated by property lawyers with the care they deserve.

When the lease is being negotiated, there is often an opportunity to add value for the client by obtaining amendments to the transaction for the benefit of the client. The consequences of getting the lease wording wrong could result in substantial cost to the client, and potential liability for the practitioner.

 

Content outline

  • Lease overview
  • Standard forms
  • Beyond the lease contract: obligations and compliance issues under the general law
  • Statutory compliance issues
  • Rent reviews: some procedural issues
  • Renewals of leases
  • Assignments and sub-leases
  • Default
View contents page
 

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