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A lease can be one of the most important contracts that a business of any size will enter into. It is a significant time and financial commitment. Therefore, as a prospective tenant, it is important to understand the steps and processes involved when you establish a commercial lease in New Zealand.

Whilst you should always seek legal advice before you sign any documents, this article sets out the practical steps involved.

Find a Suitable Premises

The first step is to find a suitable premises. Ensure you have considered the physical, practical and financial requirements of your business when searching. It is a good idea to do some research on the commercial real estate market, too. Understanding the market and rent will put you in a better position to negotiate the terms.

You might also consider engaging a tenant representative to do the leg work for you. They will have the experience and knowledge of the commercial real estate market to search for and present suitable options to you.

Contact an Agent

Once you have identified a suitable premises, reach out to the agent, or the landlord directly if there is no agent. They will be able to provide information about the premises and the commercial terms. If you have a tenant representative, they will likely do this on your behalf.  You should also start investigating with relevant authorities whether there are any permits or approvals you will need to obtain and any works to the premises that you will need to undertake before they are suitable for your use. You will need the landlord’s approval of the works and your plans and specifications before you can carry them out. Therefore, it is a good idea to have your approvals obtained in advance. This also ensures that the lease covers any requirements you have, or works the landlord may need to undertake.

Negotiate the Terms

The next step is to start negotiating the terms of the commercial property lease with the landlord. At this stage, you may enter into either a non-binding heads of agreement, or the standard binding Agreement to Lease document provided by the Auckland District Law Society. Both of these documents should summarise the key terms of the lease. 

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You must understand which document you are entering. If you enter into the Agreement to Lease document, this will be binding on yourself and the landlord. Furthermore, if you enter a Deed of Lease subsequently, this will simply be a formality.  If, however, you sign a generic heads of agreement document, this is likely to be non-binding on both parties until the formal lease is signed. Either way, it is important to ensure that whatever document you sign reflects the agreed key terms of the lease This includes matters such as the term, commencement date, and rent.

At this point, you should obtain legal advice before signing, particularly if you are entering into an Agreement to Lease. 

Deed of Lease

Once the Agreement to Lease or HOA has been signed, the landlord will need to prepare a Deed of Lease. The Auckland District Law Society will provide this. This Deed is slightly different from the Agreement to Lease and HOA. This is because it includes the key terms of the lease and outlines in further detail the rights and obligations of the property owner and tenant. These rights and obligations can vary from the day-to-day use and maintenance of the premises to how either party may terminate the lease. If you have already signed the legally binding Agreement of Lease, signing the Deed of Lease is more of a formality. However, before signing anything in this step, you should obtain legal advice.

Further Negotiations

Once you have obtained legal advice, the next step may be to negotiate with the landlord. Remember, negotiations can take time, so factor this in when considering the amendments.  The landlord is not likely to give you access to the premises, even if the commencement date has passed, if the lease documents have not been signed. If you are still negotiating close to the commencement date, you could lose your leverage. Both your tenant representative and your legal advisor will be able to assist you with negotiations. 

Final Steps

Once you have agreed to the lease, the next step is to sign the documents and return them to the landlord. You may also need to provide additional items with the signed lease as a condition of your access (e.g. evidence of insurance, security). Once you have returned the signed lease and other items, the landlord should give you access to the premises in accordance with your lease.

You may also need the landlord to register the lease on title. Registering the lease protects your interest in the premises because it ensures that a new owner will be aware that your lease to the premises exists if the landlord ever sells the premises. Registration can be done by receiving consent from the landlord and the mortgagee and is lodged through the Land Information New Zealand. Once these steps are complete, you can enter the lease and take possession of the premises. 

Key Takeaways

Entering a commercial lease in New Zealand requires many steps. Firstly, you must find an appropriate premises and communicate with the agent. Next, you need to negotiate the terms and sign either a non-binding heads of agreement or the standard binding Agreement to Lease document. Following this, a landlord will prepare a Deed of Lease, which you may consider negotiating. Once these documents are complete and signed, you may consider discussing the registration of the lease with your landlord to ensure you are protected if they ever choose to sell the property to a third party. 

If you need help with commercial leases, our experienced property and leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.

Frequently Asked Questions

What is a commercial lease?

A commercial lease is a document that sets out the rights and obligations of a landlord and tenant for a commercial premises. It can be one of the most important contracts that a business of any size will enter into.

How can I find a suitable premises?

Consider the physical, practical and financial requirements of your business when searching for a premises, and ensure you research the market. You might also consider engaging a tenant representative to do the leg work for you. They will have the experience and knowledge of the market to search for and present suitable options to you.

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

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