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When To Sign a Commercial Lease Agreement in NZ

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Finding a prime location for your business is essential. However, signing your commercial lease may be more important. Without a signed commercial lease agreement, the lease may not be binding, and you will not have access to your chosen property. As a business owner, you may need clarification about when you should sign the lease. The timing of this could determine whether you obtain the premises or not. Therefore, ensure you devote careful consideration to this. This article will outline when you should sign your commercial lease to avoid future problems. 

What to Consider Before Signing Your Lease

Before signing the lease, you should carefully read over it and ensure that there are no terms you disagree with or wish to negotiate further. Likewise, you should ensure that the lease benefits your business and will not hinder your activities. You may want to consider the following:

  • lease term;
  • your obligations for maintenance, repairs, and outgoings;
  • rent review;
  • personal guarantees;
  • the landlord’s ability to change rent amount; and
  • permitted use of premises.

Furthermore, there are some essential terms that your lease agreements need to have. This includes:

  • names of parties;
  • description of premises;
  • fixtures and chattels description;
  • rent amount; and
  • Insurance.

Before signing the lease, it is prudent to inspect the premises. This will ensure that you are happy with the property and help avoid making a bad investment. In addition to this, you can identify any issues with the premises, such as existing damages. Noting these can prevent the landlord from blaming you for damages.

To help you identify and track existing damages, you can obtain a Premises Condition Report. This will record the condition of the property and provide photo evidence. While this is not a legal requirement, it is beneficial to have to help reduce uncertainty and future disputes.

When to Sign a Commercial Lease

Once you find the perfect property for your business and are happy with the commercial lease, you should sign the agreement as soon as you can. This will ensure that the landlord does not lease the property to someone else. Alternatively, many business owners choose to sign the commercial lease a month or a week in advance, depending on their needs. 

However, if you are uncertain about the property, avoid rushing to sign the agreement. Instead, weigh up all your property options. You can sign the lease when it best suits you, although signing the lease a day before your move-in date can be extremely risky. 

For example, suppose you are happy with your lease but not ready to commit as you are still considering another lease. While the lease remains unsigned, neither you nor the landlord are legally bound by it. Consequently, the landlord can choose to sign the lease with another candidate, leaving you having to restart your search for a commercial property. 

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What if the Landlord Wants Me to Sign Now?

If the landlord is pushing you to sign the lease as soon as possible, you can refuse. Likewise, you can negotiate a suitable time to sign the lease with your landlord. Alternatively, if the landlord tries to force you to sign the lease and you choose not to, you may be dodging a bullet. 

Under New Zealand law, your landlord cannot use illegitimate use of pressure or coerce you into signing the lease. If you can prove to the courts that you were under duress when signing the lease, then the lease can become void, and you have a right to cancel it. The lease obligations will no longer bind you with a lease termination. 

To be under duress means you are aware of what you are doing but acting against your will. To use the defence of duress in court, you need to prove the following:

  • you were under illegitimate pressure due to a threat or another act; and
  • that this illegitimate pressure pushed you into signing the lease.
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Key Takeaways

Before signing your commercial lease, you should consider the lease terms and ensure everything is to your satisfaction. Additionally, you can obtain a Premises Condition Report to record any existing damages to the property. Thereafter, you can sign the commercial lease whenever you are ready. It is recommended to sign the lease as soon as possible rather than leaving it till the last minute to ensure that the lease is not given to someone else. When signing the lease, it is vital to note that the landlord cannot coerce you into signing it. 
If you need help signing the lease, you can contact our experienced property lawyers to assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at  0800 005 570 or visit our membership page.

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Zaakirah Nabi

Zaakirah Nabi

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