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Vacant possession

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What does it mean?

If you are buying a property and intending to live in it, one of the first things that you should ensure is that the property is being sold with vacant possession.

Vacant possession means that you receive the property without the previous owners or tenants still occupying the property. This is an important feature of every property transaction; it is difficult to move in if someone else is still living in your new home. As a purchaser you might also include a clause requiring all rubbish and chattels to be removed by settlement date too, with the property to be left in a clean and tidy state.

Timing for vacant possession

The usual position is that vacant possession needs to be given to the buyer no later than 4:00pm on the settlement date. Best practice if you are selling is to have moved out as soon as possible, ideally before the settlement date so that there are no unnecessary delays on the actual day. This isn’t always possible if you are settling on the property you’re moving to on the same day. In this instance, it is important that you let us know not to settle until you can provide vacant possession. You must have all of your belongings moved, and any rubbish cleared from the property so your buyers can move in straightaway.

At the same time, it is prudent that the property that you are moving into is also vacant.

Clear communication with us regarding timing and/or pre-planning or storing items ahead of your settlement can help alleviate this kind of pressure on the settlement date. The times for performance of your settlement day obligations are all recorded in clause 3 of the standard sale and purchase agreement of real estate, along with the remedies available to buyers where vacant possession cannot be provided.

Tenanted properties

The circumstances where a property might not be sold with vacant possession would usually include a tenanted property being bought for an investment purpose where the buyer wants to retain the current tenant for rental income. Due to this being a relatively unusual occurrence, sellers looking to make their sale as attractive as possible should consider selling with vacant possession so their potential sales market is not limited.

If you are selling a property that is tenanted and want to provide vacant possession, you should ensure that you give your tenants the requisite notice under the Residential Tenancies Act 1986 that they need to move out in the required time period. Failing to do so could result in delays to the settlement of your sale that could potentially cause penalty interest to be payable to the purchaser.

Unable to provide vacant possession?

If you cannot provide vacant possession for your buyer on the settlement date, there are some actions that may be taken by the buyer set out in clause 3.13 of the agreement.

Refusal to settle: If you cannot move out and are still occupying the property or if your tenant has not moved out due to not being given the requisite notice or some other dispute, the buyer may refuse to settle. This can be a serious problem where you are relying on funds from your sale to complete a purchase; it may result in a chain of defaults for which you (as the originating defaulting party) may be liable. The cost for delaying settlement is generally prescribed by the penalty interest rate that is recorded on the front page of the agreement.

Withholding funds: If you have moved out but left belongings at the property, the buyer may seek to withhold a portion of the purchase price on settlement until this is removed. If you do not remove these items within an agreed time period, the buyer may retain those withheld funds. Again, if you require every penny from your sale proceeds, this could also trigger a chain of defaults.

Compensation claim: In some instances the buyer may claim compensation from you under the compensation process in clause 10 of the agreement. This will be a claim for the cost of removing any items left behind that the buyer has had to dispose of or any other costs that the buyer has incurred as a result of you failing to provide vacant possession. A disputed claim for compensation could result in a delay to settlement while the dispute is resolved.

Get organised

Due to the severity of the consequences of not providing vacant possession and the potential cost associated with failing to do so, it is crucial that you discuss with us your transaction timeline to ensure that your settlement proceeds smoothly rather than turning into an expensive nightmare.

DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Property-briefs

Property Briefs

Business Ethics, First Job, House, Media, Politics & Government, Social Media, Trusts
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Healthy home standards compliance from 1 July 2025

First introduced in 2019, healthy home standards are the minimum legal standards expected of rental properties in New Zealand. These include:

  • Heating (provision of functioning and fixed (not portable), heaters in the main living room)
  • Ceiling and underfloor insulation, and
  • Adequate ventilation (functioning doors and windows, and extractor fans in the kitchen and bathrooms).

From 1 July 2025, all landlords are responsible for ensuring their rental properties comply with healthy homes standards (and continue to comply with them over time). Landlords who do not comply will be in breach of the Residential Tenancies Act 1986 and can be penalised up to $7,200 per breach. Landlords who are ignorant of these changes or disorganised will not be excused.

Landlords in new or renewed tenancy agreements must include a signed statement detailing the property’s compliance with the standards. Failing to do so can result in a penalty. There are also penalties to the landlord if they provide misleading information in compliance statements.

If you are a tenant and you are concerned that your rental property does not comply with healthy homes standards, we recommend having a friendly chat to your landlord first. Failing that, please contact us and we can help you explore your options.

On the other hand, if you are a landlord and are concerned about your obligations under the healthy homes standards, please come and see us for advice.

Sunset clauses – the new bill introduced into Parliament

The Property Law (Sunset Clauses) Amendment Bill was introduced to Parliament on 9 April 2025 and is tracking towards its first reading. The bill is aimed at restricting sellers developing vacant plots of land from using ‘sunset clauses’ to cancel sale and purchase agreements. It also provides an extra layer of protection to buyers who, in good faith, have made the commitment to purchase the property.

In this context, a ‘sunset clause’ is a provision added to an agreement for the sale and purchase of a plot of land in development which allows the seller or buyer the option to cancel the agreement if the development is not complete by the specified date.

There have previously been situations in which sellers have used these clauses to cancel an agreement, where there have been delays in development, only to then go and list the property at a higher price.

This legislation would require the seller to obtain the buyer’s written consent to cancel the agreement under a sunset clause. There would also be the requirement to give sufficient notice of, and reasons for, the proposed cancellation to the buyer in advance. This is the extra layer of protection given to the buyer.

If the buyer does not consent to the agreement being cancelled, the seller would need to apply to the High Court for an order permitting the cancellation. On the seller’s application, the court would only make the order if it is satisfied that its making would be ‘just and equitable in all the circumstances.’ The court would consider various factors including whether the seller has acted unreasonably or in bad faith, the reason for the delay in completing the development, whether the land has increased in value and the effect of the cancellation on the buyer.

If this law is passed and you are a seller or buyer who seeks to activate a sunset clause, please get in touch with us – we would be happy to assist you.

Real estate agent commission – claim or not to claim?

Before a real estate agent lists a seller’s property, the parties enter into a ‘listing agreement’ or ‘agency agreement,’ authorising the agent to sell the property on the seller’s behalf.

The real estate agent receives a commission (a percentage of the sale proceeds) for introducing the buyer to the property. The real estate agent usually takes their commission out of the deposit the buyer pays when the agreement for sale and purchase becomes unconditional.

However, there are some situations in which an agent is not entitled to be paid their commission:

  • Where there is no listing agreement in place
  • If an agreement for sale and purchase does not become unconditional and is cancelled, and
  • If the property is pulled from the market and the seller cancels the listing agreement (but note that the agent may still charge a fee).

If you are considering selling your property and have any questions about entering into a listing agreement, please come and see us for advice first.

DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

 

Life Stage – First Home

Economy & Finance, Employment, Estate, House, Media, News, Online, Uncategorized
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It felt like Bob’s life had been turned upside down. Not only had his father, Steve, passed away recently leaving him upset and overwhelmed, but his burger bar business was also struggling. Bob had put all his life savings into his burger bar, which he opened 6 months prior. Further adding to the stress, Bob currently did not have a home. He had been couch-surfing at friends places while he saved up enough to rent a place of his own.

 

After a few difficult months, Steve’s estate was finally settled. As one of the beneficiaries, Bob received a substantial inheritance. Though the money offered some relief, Bob knew he needed to use it wisely. His first step: finding a home. He realised that in order to take care of his business and himself, he needed a stable place to live and rest, putting him in a better frame of mind to make smart business decisions.

 

As Bob now had more funds than he had expected to receive from years of working, he decided this was the right time to buy a property rather than rent. He browsed listings on local real estate websites and soon found a small, tidy place in a quiet neighbourhood—within his budget and close to his burger bar.

 

He decided to call his lawyer and ask for the things he should consider before making an offer. His lawyer guided him through several key considerations:

 

  1. Conditions in the Sale and Purchase Agreement: He needed to decide whether he wanted to include conditions in the agreement. He already had the funds available for the purchase so he did not need to make it conditional on finance. Bob did not realise that he could also include other conditions such as a LIM report, builders report, and toxicology report. Bob decided to include each of these as it was better to make sure there were no big issues before being locked in a deal.

 

  1. KiwiSaver: If Bob has KiwiSaver funds, he would need to fill out an application to withdraw the funds from his provider. He would need a solicitor to witness him signing this as it could not be left until the last minute.

 

  1. Insurance: The lawyer stressed to Bob the importance of checking he could obtain insurance cover for the property prior to going unconditional. Also, if there were any issues under the builders report / LIM report / toxicology report, he would need to disclose said issues with his insurer.

–

  1. Relationship Property: Bob had not had the time to date with everything going on but was made aware to obtain advice in this regard once he had a partner in the future.

 

Bob took all the advice into consideration and obtained all recommended reports. Within weeks, his purchase when unconditional, and weeks after, settled.

 

Bob was beyond happy, he now felt as though he had the stability he had been searching for. This feeling lasted only a few minutes though as Bob was about to receive a call in relation to his business that would change everything…

 

 

Macayla Brdanovic 

 

 

Are you an artist, a composer, an author? Are you in a relationship? If so, then you need to seriously consider a contracting out agreement.

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Are you an artist, a composer, an author? Are you in a relationship? If so, then you need to seriously consider a contracting out agreement.

 

Copyright is treated as relationship property for the purposes of deciding who gets what at the end of a relationship. This means that, if you separate, your ex could have a claim over the copyright in your work.

 

Owning copyright in your work means that you have the exclusive right to control how your work is used. Importantly, owning copyright means that you can prevent someone from making copies of your work. But, if it ends up in the hands of your ex? Well, that could lead to results that you won’t like. For example:

 

  • That novel you slaved over for weeks, months, and years part-time while you were working on a construction site during the day? Your ex might be able to sell copies of it after the relationship is over and make money from your efforts.
  • That series of paintings you lovingly painted and kept in your own private collection, while you successfully commercialised the rest of your works? Your ex might be able to have t-shirts made for sale with copies of those paintings in your private collection.
  • That carving you created painstakingly on your weekends off? Your ex might be able to flood the market with thousands of copies, devaluing your sculpture and the prestige.

 

If you want to avoid this outcome, then your best option to reduce this risk is to enter a contracting out agreement with your partner.  Under a contracting out agreement, you and your partner can agree who gets what in the unfortunate event that your relationship doesn’t stand the test of time. If you want a contracting out agreement, you’ll need to see a lawyer to make sure that you comply with the legal requirements for these agreements and ensure your best chance of any agreement being enforceable in Court.

Steve’s Big Decision: He’s ready for the next chapter – Retirement

Estate, Health Issues, House, Kids, Latest news, Media, Property, Relationships, Retirement
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Brought to you by Edmonds Judd – Your Life Your Lawyers

 

Steve has spent the last 45 years building a life he was proud of—raising a family, growing his business, and working hard every step of the way. But now, for the first time in decades, he was thinking about something new: retirement.

 

The thought was both exciting and overwhelming. Should he downsize to a smaller home? Maybe move into a retirement village? What about his Will—did he have one and if so, was it up to date? And who would make decisions for him if one day he couldn’t?

 

That’s when Steve decided it was time to talk to someone who understood the journey ahead—someone who specialised in elder law.

 

At Edmonds Judd, Steve found the guidance he needed. The team took the time to sit down with him, listen to his concerns, and explain everything. This helped Steve put a clear, confident plan in place—updating his Will, setting up Enduring Powers of Attorney, and walking through the legal details of retirement village living. Most importantly, they made sure Steve’s wishes—and his family—were protected.

 

Steve created an estate plan that matched his life now—not the one he had twenty years ago. Steve knew that his family would be protected, and that his wishes would be carried out no matter what the future held.

 

He learned that retirement planning wasn’t just about money—it was about peace of mind.

 

“It’s not just legal paperwork,” Steve told his children Luke and Sally one evening, “It’s making sure you’re all taken care of, no matter what.”

 

Thanks to Edmonds Judd, Steve now looks forward to his next chapter in his life with confidence and clarity.

Rachael Beattie

Over the fence

Health Issues, House, Latest news, Media, Relationships
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Employer obligations: mental health

As an employer, you have a duty of care for both the physical and mental health of your employees’ health.

Health and Safety at Work Act 2015 (HSWA): Under the HSWA, you have an obligation to minimise the stress and mental health impacts that arise from within your workplace. This includes monitoring increased workloads to ensure your employees are not overexerted and stressed, investigating any bullying claims and ensuring a safe working environment.

Employees’ rights: Your employees are not obliged to disclose a mental health condition unless it will directly impact their ability to safely perform their role. If you ask about a mental illness that directly impacts their ability to perform their role safely, they must tell the truth. There is a risk of disciplinary action if they do not provide you with the correct information.

You cannot discriminate against any employee (or potential employee) if they have a mental illness. These discriminations could be:

  • Not offering a job due to their disclosed mental illness
  • Not promoting as a consequence of their mental illness, or
  • Providing less favourable terms of employment as a result of their mental illness.

Employee action for perceived discrimination: If your employee believes they are being discriminated against, they may wish to discuss this with you to try and resolve the matter. If this is not successful or not appropriate, they can seek support from the Employment Mediation Services, raise a personal grievance or make a complaint to the Human Rights Commission.

What can employers do? You can help to facilitate a positive working environment and take steps to protect your employees by:

  • Providing support if a traumatic work event occurs
  • Offering flexible working environments including hours/days worked and the location for work to be completed by, for example, using other machines
  • Allowing time off to attend appointments
  • Providing resources such as counselling, work mentoring or stress management courses, and
  • Changing your employee’s duties.

It is important that you talk with your employees and take necessary steps to support them the same way you should protect their physical wellbeing.

Firearms reform 2025

Commercial, Employment, Health Issues, Latest news, Media, News
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Government considers current legislation to be outdated and overly complicated

The government is currently undertaking a comprehensive reform of our firearms laws; it aims to modernise the Arms Act 1983 which it considers to be outdated and overly complicated. The overhaul is the fourth phase of a commitment to reform the firearms regulatory system following on from three previous phases implemented after the 2019 Christchurch mosque shooting.

Public consultation on the proposed changes took place earlier this year.

 

Proposed changes

Key proposals include:

  • Rewriting the Arms Act 1983 entirely to create a more coherent and effective legislative framework that balances public safety with the rights of lawful firearms users
  • Strengthening Firearms Prohibition Orders, expanding the criteria and allowing the courts to impose Orders on gang members and associates convicted of drug, firearms or violent offences
  • Reviewing the Firearms Registry to assess its effectiveness and identify areas for improvement. The government aims to ensure it is promoting public safety without imposing unnecessary burdens on lawful firearms owners
  • Transferring the Firearms Safety Authority (to be renamed the Firearms Licensing Authority) from the responsibility of New Zealand Police to the oversight of another government entity. The government believes this will enhance independence and effectiveness of firearms administration, and
  • Amending the regulations of shooting clubs and ranges to ensure their facilities are operating safely and compliantly while supporting legitimate activities of firearms enthusiasts.

 

Potential benefits

The proposed reforms have several potential benefits, including:

  • Improved public safety with stricter controls and strengthened Firearms Prohibition Orders
  • Better regulation and oversight to modernise outdated laws
  • More effective firearms licensing through an independent Firearms Licensing Authority, allowing police to focus their resources more on illegal firearms and gang-related gun violence rather than administrative licensing work
  • Enhanced gun owner responsibilities through increased requirements for safe storage, record-keeping and reporting, and
  • Stronger measures against gun trafficking through stricter background checks, licensing and a well-regulated system.

With each benefit, however, shortcomings follow. Potential drawbacks include:

  • Possible overreach and bureaucracy leading to inefficiencies, delays and higher administrative costs
  • Limited impact on criminals and gangs given most gun crimes involve illegally obtained firearms, unaffected by strict laws. Police unions have expressed concerns that moving licensing away from the police could weaken police ability to monitor gun-related crime
  • Compliance challenges, with some gun owners struggling to comply with new laws due to lack of awareness or financial barriers, such as affording secure storage or meeting new licensing requirements
  • Potential for unintended consequences, such as over-regulation leading to more non-compliance or a larger black market, and
  • Farmers and pest controllers who rely on firearms for work may face unnecessary restrictions affecting their business operations.

Federated Farmers has been particularly vocal about the rewrite, noting that the changes over the previous government’s term were ‘a whole lot of really silly, impractical amendments’ that have made it harder for people to access firearms.

Farmers have noticed how those changes have made it harder but cannot identify anything that has made it easier. Farmers have a genuine need for firearms and gun laws need to be more straightforward for those who need reasonable access to firearms.

The government has now completed public consultation; it aims to pass the new firearms legislation before the end of its current term in 2026.

Updates to the residential tenancies legislation

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Tenancy terminations and pets

The Residential Tenancies Amendment Act 2024 has significantly updated the Residential Tenancies Act 1986 and the laws governing the relationship between landlords and tenants.

Some of these updates took effect on 30 January and others are expected to  roll out in the remainder of 2025. These updates transform the rights and obligations of landlords and tenants – for better or for worse. We summarise the key updates below.

Termination of tenancies

No reason needed to terminate tenancy: Since 30 January 2025, landlords are no longer required to provide a reason to their tenants for terminating a periodic tenancy; they simply have to state they are giving 90 days’ notice of termination. For clarity, a ‘periodic tenancy’ is a standard tenancy with no end date, unlike a ‘fixed term’ tenancy which lasts for a set amount of time, say 12 months. Before 30 January 2025, landlords had to give grounds for terminating a tenancy, such as for demolition or extensive renovations.

Terminating on ‘special grounds’: Landlords now only need to give 42 days’ notice when they are terminating the tenancy on special grounds, including if a family member needs to live in the property as their main residence, or the property has been sold and needs to be vacated for the new owners to take over. Until 30 January,  landlords had to give 63 days’ notice.

More rights for tenants: The legal rights and abilities of tenants have also increased. Tenants now have up to 12 months to apply to the Tenancy Tribunal for an order declaring a termination notice to be unlawful and that the landlord has retaliated against the tenant for enforcing their legal rights, or in response to legal actions taken against the landlord by another person or body. If a tenant applies within 28 days of receiving the termination notice, they can request that the notice be cancelled.

Before 30 January 2025, tenants only had 28 days to apply to the Tenancy Tribunal in respect of a notice in general.

Tenants also now only need to give 21 days’ notice for ending a periodic tenancy. Previously, they had to give at least 28 days’ notice.

The Amendment Act also confirms that tenants may leave their tenancy at shorter notice if they, or one of their dependents, are experiencing family violence.

It will be interesting to see how these amendments play out, especially when reviewing future decisions of the Tenancy Tribunal, including where tenants dispute termination notices. We touch upon other changes and updates to the powers of the Tenancy Tribunal below.

As an aside, the ways in which landlords and tenants can give notice to one another has changed. The Amendment Act confirms that landlords and tenants can give notices in more modern ways, such as over text or messenger, rather than a physical written notice.

Pets

In the second half of 2025, we expect to see major law changes relating to pets kept in rental premises. Landlords will be able to require their tenant to pay a ‘pet bond,’ on top of their original bond, which can  be an additional two weeks’ rent on top of the original bond. A tenant must obtain their landlord’s written consent to keep a pet on the premises. A landlord may refuse the request only on reasonable grounds, including the premises not being suitable for the type of pet or vice versa. It could be that the breed of dog is too large, and/or the nature of the breed is considered destructive or aggressive and/or could be disruptive to neighbouring properties.

If a tenant’s pet dies during the tenancy, the tenant is entitled to ask for the return of the pet bond from the landlord less any compensation for any damage, and reasonable wear and tear attributable to the pet.

We look forward to seeing how these new rules relating to pets play out.

Tenancy Tribunal

Since 20 March 2025, the Tenancy Tribunal should become quicker and more efficient in its day-to-day operations. The Tribunal now has, for example, the ability to determine matters ‘on the papers’ (considering an application and response, then making a decision) without the need for a hearing.

In more complex and technical cases, and where there are major factual disputes, however, it is likely that the Tribunal will still require a proper hearing.

Issues affecting finance and settlement

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Natural disaster risk and insurance

When you have lending secured by a mortgage on your home, it will be a condition of that lending that you have full replacement insurance for your house. This is a requirement for any new lending (and your lender won’t allow you to draw down the loan without seeing evidence that this in place), and an ongoing requirement with existing lending.

Insurers are now commonly asking whether the local council has recorded that a property could be impacted by any natural hazards (for example, whether it is in a flood zone). If it is noted that the property is potentially impacted by a natural hazard, the insurer may have some follow up questions before deciding on whether it will offer insurance. It may ask whether the local council has completed any remedial work to address the hazard, or whether any specific work has been completed with the property to reduce the impact of the hazard, such as the property being built on piles to elevate it above the anticipated flooding level.

Insurers are also asking questions about whether the property has previously been affected by natural hazard events, such as flooding, earthquakes or landslides/slips.  As above, if it has, an insurer is likely to have follow up questions regarding any remedial work that may have been completed.

Depending on the potential hazards, some insurers may be reluctant to offer insurance cover. If you are considering buying a property that could potentially be impacted by natural hazards, we recommend you confirm you can obtain full replacement insurance before submitting an offer or within the period of your finance condition.

Unconsented works: what can go wrong when selling?

Completing work on your property without obtaining a building consent may seem like a good way to renovate your property without the time delays or cost of your local council involvement. It is, however, likely to lead to significant headaches during your ownership or when you sell your property.

Should you suffer a loss to your property that is caused by non-compliant work, such as installing a wet-area shower without a building consent and the shower room then floods and causes water damage to your property, you may find that your insurer declines your claim. Not only can this mean you will need to fund the cost of repairs yourself, but it can also have implications in obtaining other insurance policies in the future as you will need to disclose that you have previously had a claim denied.

When selling your property, you have an obligation to disclose to buyers any work you have completed but for which you have not obtained the required consent. Additionally, buyers will often review either a Land Information Memorandum or the Property File as part of their due diligence. If the buyer (or their lawyer) notices that there are renovations to the property which required a building consent and it was not obtained, the buyer may not be able to obtain insurance or finance.

Any unconsented works will need to be disclosed to both the insurer and the lender.  Depending on the nature of the work (and the insurer), insurers may decline to cover the property with the unconsented work.

If the buyer can’t obtain full replacement insurance, they will not be able to confirm satisfaction of a finance condition. Even if the buyer can obtain insurance, their lender may not accept the property as security; this means the buyer will be unable to confirm satisfaction of the finance condition.

We recommend you always obtain the required building consent before beginning any building work.

If you have already completed work without a building consent, talk to us about the best way to approach your local council to rectify the issue.

If you aren’t sure whether your next project requires consent, Can I Build It is a good tool which can be used as a guideline; the website can be found here.

New deed of lease documentation

Commercial, Employment, House, Media, News, Property
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Landlords and tenants should be up to date

 

In November 2024, The Law Association of New Zealand (TLANZ), formerly the Auckland District Law Society, released an updated version of the standard form deed of lease document, its 7th edition.

This new edition of the deed of lease (DoL) includes a number of new or varied provisions that TLANZ has included in response to the evolving commercial leasing landscape; in some cases these provisions address pitfalls in earlier DoL editions that sought to deal with issues that arose during Covid. The result is that there are a number of new default provisions for both landlords and tenants to consider when entering into a lease, and new procedures to be aware of that didn’t form part of previous leases.

Rent

Numerous provisions affecting rent, rent adjustment and rent abatement have been included in this new DoL. Where previous DoL editions referred only to CPI or market rent adjustments, the 7th edition includes an option in Schedule 1 to include a fixed rate adjustment for rent. That means that on the rent adjustment date recorded in your lease, the rent will be adjusted by a fixed percentage, rather than an adjustment being based on market rent or a CPI calculation.

There are benefits in this approach for both landlords and tenants. It provides a greater level of certainty for anticipating rent increases for tenants and income for landlords.

In addition to adding this option, the 7th edition has added to Schedule 1 an option to include upper and/or lower limits on rent adjustments. This sets out at the forefront of the DoL limits on any ratchet-type provisions which previously would have been buried in the standard/further terms of the lease.

Again, these provisions can give greater clarity to both parties around the extent of any rent adjustment, where the adjustment is not a fixed rate, and would advise tenants whether an adjustment could result in a lower rent payable (although it is rare that this would be the case).

Outgoings

The outgoings are other expenses under the lease that the landlord passes on to their tenant. The 7th edition requires, as the default position, that the landlord provides an annual budget of outgoings to the tenant.[1]

This is a helpful inclusion for tenants as it provides certainty for budgeting and greater transparency around the costs additional to rent that the tenant must pay. This is invaluable information for anyone looking to enter into a lease and should be reviewed by any prospective tenant prior to entering into a new lease.

Reinstatement

Reinstatement is not a new concept under the lease, although provisions have been added to better define the rights and obligations relating to signage, tenant’s chattels, alterations and the premises overall.

An important aspect of this relates to the tenant’s chattels; this is a new inclusion in Schedule 6. Items listed here will inform the obligations around the removal of tenants’ chattels under the new reinstatement provisions.[2]

Knowing what tenants need to remove, put back and who bears the cost is crucial to understand before entering into a new lease, especially if you plan on modifying the premises in any way before or during the term. A tenant will always need the landlord’s permission to make any changes or alterations, and it is best to get this in writing.

Rent abatement

If at any time a tenant cannot access the premises (or part thereof), they should receive a discount on the rent at the rate that is set out in Schedule 1. This has been included to set a starting point for rent to be discounted during no access periods rather than tenants having to endure a long determination process to agree the discounted rate during the term of the lease.

The rate recorded in Schedule 1 can be reviewed under the terms of the lease and the process for this is clearly set out.[3]

These are just some of the changes that have been included in the Deed of Lease 7th edition. Whether you’re a tenant entering into a new lease for your business or you’re looking to get a lease prepared for a commercial property you own, talk with us so you understand and use these changes to ensure the terms are best suited for you.

 

 

 

[1] Clauses 3.7–3.10 in 7th edition.

[2] Clauses 23.1–23.5.

[3] Clauses 29.3-29.5.

Get in touch today, we’d love to talk.

+64 7 872 0236 [email protected]