Commercial Leases - Rent Relief in an Emergency

31 March 2020

A number of landlord and tenant clients have asked us to advise in respect of the current lockdown and the effect this will have on the tenant’s obligation to pay rent and outgoings as per the terms of their lease.

The primary consideration is the form of the lease itself. The most common form of lease used in New Zealand is the Auckland District Law Society Deed of Lease (ADLS Deed of Lease).  The ADLS Deed of Lease was updated in 2012, following the Canterbury earthquakes, to include clauses which provide for rent relief in the current situation.

However, earlier versions of the ADLS Deed of Lease do not contain any such rent relief provisions.  Further, any non-ADLS leases (i.e. bespoke shopping centre leases) would need to be thoroughly reviewed in order to determine the basis for any potential rental abatement.

Landlords may be considering their “loss of rents” insurance in respect of the period for which the rent abatement will apply however in most cases exclusions will probably apply.

Any concession by the landlord should be subject to review from time to time-based on anything the Government may do in the interim, as this is likely to be a fluid situation over the coming weeks.

Further, the landlord should consult with their bank (if applicable) prior to agreeing on any concession.

If you have any further questions on these matters please contact Malley & Co Consultant, Dominic Fitchett or Partner, Chantal Morkel.

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