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When you enter into a commercial or retail lease, your lease agreement must contain the requisite elements. If not, the obligations in your lease may not be enforceable. In New Zealand, the legal elements of a valid retail or commercial lease agreement are:

  • the exclusive possession by the tenant of the premises;
  • a clear description of the premises; 
  • the term of the lease; and 
  • creation of the lease in the proper form.

1. Exclusive Possession of the Premises

To be valid, a lease must provide the tenant with the legal right of exclusive possession of the premises for the lease duration. 

Exclusive possession means the right to exclude all other persons from the property you are leasing. This right extends to the landlord’s exclusion, except where they have a legal right to entry. Your landlord has a right to entry to:

  • repair damage done to the property; 
  • inspect the commercial space; or 
  • serve a notice to cancel the lease, due to a failure to pay rent or a breach of the lease.

2. Description of the Premises

If the commercial lease is to provide you, as a tenant, with the right to exclusive possession of the premises, it must outline what the premises are

The premises must be clearly identifiable. Therefore, the lease should detail whether the property encompasses:

  • the whole building;
  • part of the building. For example, it may be for the ground floor of the building, or one particular shop or space;
  • the common areas, such as the staircase or lifts; and 
  • the property’s exterior, including any other related areas such as car parking spaces or a storage unit.

3. Term of the Lease 

To be legally enforceable and binding, a retail or commercial lease must be for a definite period. The lease term will be clear if it has a specific time for commencement and for ending. The lease term should specify both of these dates. 

The commencement date of your lease may be a trigger date. This is when the lease agreement will specify that your tenancy will begin, and the lease will be enforceable, once a specific event has occurred. This may be when:

  • your landlord finishes renovations on the premises; 
  • all parties sign the lease agreement; or
  • the current tenant of the property moves out. 

4. Proper Creation

A lease can only be binding if you draft it in the appropriate form. A legally enforceable lease comes in various forms, such as a deed of lease, a registered lease instrument, or an agreement to lease. Each differs in its formality and requirements.

Deed of Lease

A deed of lease is a formal legal document. To create a binding deed of lease, you must follow specific steps:

  • the deed must be in writing;
  • both you and your landlord must sign the deed; 
  • someone who is not a party to the deed must witness these signatures, and provide specific details about themselves. These are the name of the city they live in and their current job description; and
  • you must deliver the deed. A deed of lease will be delivered when it is apparent that both you and your landlord intend to be bound by it. This may be indicated by the payment of a security deposit or when you move into the premises and start paying rent. 

Although rent payment is not required to create a binding deed of lease, you will likely have to pay rent to the landlord for your right to use the premises.

Registered Lease Instrument

A registered lease instrument is a formal written or electronic document that has been registered under the New Zealand land title register. A lawyer can register the lease agreement by lodging the document with Land Information New Zealand (LINZ). This has to be:

  • in writing and;
  • signed by both you and your landlord. 

Agreement to Lease

You can create a lease informally through an agreement to lease. To be legally binding, an agreement to lease must have the requirements of an enforceable contract. It must contain:

  • a clear offer to lease that the tenant has accepted. This acceptance tends to be indicated by a signature; 
  • an exchange of value or promises between the landlord and tenant, or consideration. For commercial or retail leases, you will provide sufficient consideration through the payment of rent; 
  • certain essential terms; and 
  • a clear intention on both the landlord and the tenant to enter into binding legal relations. 

Key Takeaways

Entering into a lease for premises to run your business or company is a big commitment. Your lease agreement must contain the essential legal requirements to ensure it is binding and enforceable. In New Zealand, these are:

  • the right to exclusive possession of the premises;
  • a clear description of the premises; and
  • the period of the lease.

To be enforceable, you must create your lease in the proper form. When drafting the lease agreement, ensure it meets the requirements of a deed of lease, a registered lease instrument or an agreement to lease. 

If you are interested in entering into a retail or commercial lease, LegalVision’s leasing lawyers can help. Contact us on 0800 005 570 or complete the form on this page. 

Frequently Asked Questions

What should I include in a commercial lease agreement?

A commercial lease agreement should include the tenant’s legal right to exclusive possession of the premises, a clear description of the space to be leased, and the lease term.

What does commercial lease mean?

A commercial lease is a formal and legally binding agreement to rent a building or space used for business purposes.

What is the difference between leasing and renting a commercial property?

There is no difference between leasing and renting out commercial property.

What makes a lease agreement invalid?

A commercial lease agreement will be invalid if it does not contain the essential legal elements of a lease. These are the tenant’s legal right to exclusive possession of the premises, a clear description of the space to be leased, and the lease term.

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