Edmonds Judd

ADLS

Tenants wanting to alter the premises or their use

If you are a landlord owning commercial property, you may want to know how your tenant can make changes to the premises, or its use of the premises, without speaking to you about it first. If you are a tenant, you may want to know what you can do without being in contact with your landlord.

Tenants under commercial leases generally have fairly broad rights for the use and enjoyment of the property under the lease, but there are some limitations to what tenants can do without your consent. These include changing the business use of the property, assigning the lease or altering the premises. When considering any tenant’s request for consents under the lease, you must act reasonably.

 

Change of business use of the property

The deed of lease usually records the business use of your tenant in the first schedule. Your tenant cannot use the premises for anything other than the business use without your prior written consent. Provided the proposed use is not in substantial competition with the business of any other occupant of the property, reasonably suitable for the premises and compliant with any applicable statutory provision relating to resource management, you cannot unreasonably withhold consent to your tenant’s request to change the business use of the premises.

 

Alterations or additions

Your tenant cannot make any alterations or additions to the premises, or alter the external appearance of the premises, including affixing signs or advertising on the exterior of the building, without your prior written consent. In the case of signs, you cannot unreasonably withhold consent if the sign is to describe your tenant’s business.

If your tenant wants to make alterations or additions to the premises, or alter the premises’ external appearance, they must provide you with plans and specifications for the proposed works. They will also need to comply with all statutory requirements when completing the works, including obtaining any necessary building consents and/or compliance certificates. You cannot unreasonably withhold or delay your consent to these additions or alterations.

If you require it, your tenant (at their own cost) must reinstate the premises and repair any damage caused by the alterations or signs by the end of the lease. If the additions or alterations are not removed by the end of the lease, you may elect to retain ownership of these without any compensation payable to your tenant.

 

Assignment of the lease

Your tenant cannot assign the lease or sublet any part of the premises or carparks without your prior written consent. Again, you cannot unreasonably withhold consent. There are certain conditions which your tenant must meet, otherwise it will be considered reasonable for you to withhold consent. These include:

  • Your tenant can demonstrate to your satisfaction that the proposed assignee or subtenant is respectable, responsible and has the financial resources to meet their own commitments under the lease
  • All rent has been paid by your tenant and they are not in breach of the lease
  • Your tenant and assignee have (or will) signed and delivered to you a deed of assignment of lease
  • If the assignee is a company, you are entitled to request a deed of guarantee to be executed by the principal shareholders of that company, or a bank guarantee from a registered bank to be delivered to you as a condition of your consent, and
  • Your tenant agrees to pay your reasonable costs and disbursements in respect of the approval and the preparation of any documentation you require. These costs are generally payable whether or not the assignment or sublease ultimately proceeds.

 

Under the more recent versions of the ADLS standard lease, any change in the legal or beneficial ownership of a tenant company which results in the effective management or control of the company changing, such as the majority shareholder selling its shares, is treated as a deemed assignment and also requires landlord consent.

While landlords and tenants can generally work through issues of landlord consent at a commercial level by themselves, occasionally there can be problems, particularly if a landlord does not want to consent to the request or the request results in substantial changes to the lease.

 

It is a requirement of the lease that any landlord consent granted is recorded in writing, and we recommend for both landlords and tenants that you comply with this requirement. Any conditions to the consent, or changes to the lease which may result from the consent, should also be recorded in writing.

Whether you are a landlord or a tenant negotiating through a consent request, we recommend early contact with us. We can assist with advising what is and isn’t reasonable from each party in the circumstances, and can help to ensure that what you have agreed is correctly recorded, to reduce the chances of disputes in the future.

 

 

 

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

Unit titles legislative updates

Unit titles are most commonly used for apartments or townhouses that share amenities such as lobbies, lifts or driveways with other owners in the same building or on the same property.

The latest amendments to the Unit Titles Act 2010 came into force on 9 May 2023. These include broadening the scope of information that sellers must provide to prospective buyers, and bolstering the governance structures for body corporates that manage unit title buildings or developments.

These changes have prompted amendments in the unit title provisions in the standard ADLS Sale and Purchase Agreement. The amendments reflect the increased disclosure obligations: the wording in respect of the warranties has been updated to expressly refer to any pre-contract disclosures made by the seller.

The ADLS form has also been updated in respect of courses of action available to buyers where they don’t receive a pre-settlement disclosure statement at least five working days prior to settlement. The options available to buyers haven’t changed in themselves. Rather, the agreement clarifies where the buyer elects for settlement to take place without delay that this constitutes a waiver of any right for that buyer to delay or cancel the settlement.

The purchase process of unit title properties is different from buying other sorts of properties. If you are considering buying or selling a unit title property, these changes may impact on your rights or obligations.

 

First Home Grants thresholds increase

On 15 May 2023, the price cap thresholds across the country for Kāinga Ora’s First Home Grants (FHG) saw a number of increases. The rises were not limited to main centres; 37 areas had their price caps for new builds increased including Southland and Central Hawke’s Bay.

Similarly, the KiwiBuild caps were also raised. Notably Queenstown’s threshold increased to $845,000 and Hamilton’s rose to $860,000.

These increases reflect the rapid rise in house prices and land in the last few years which meant that in certain areas the caps were so low that they became almost inaccessible for prospective FHG applicants.

With interest rates still rising, the latest round of price threshold increases should help a wider group of first-home buyers into new or existing homes.

To find the price thresholds for existing homes or new builds in your region, click here. The Kāinga Ora website also has information on eligibility and where the territorial boundaries lie to determine which regions the thresholds apply to. We can help you in determining both your eligibility and how to access the FHG.

 

Loan to value restrictions eased

In November 2021, the Reserve Bank imposed more restrictions on banks in respect of their lending in order to help curb the rapid rise in house prices in the previous few years. This caused difficulty for potential borrowers (both owner occupiers and investors) to obtain finance.

Eighteen months on, the Reserve Bank has eased the previous restrictions on bank lending to lower equity borrowers and investors. The easing measures took effect from 1 June 2023.

Previously, banks could only allocate up to 10% of their total lending towards owner occupiers with a loan to value (LVR) ratio of less than 80%. The 1 June changes saw this increase from 10% to up to 15%. This means that banks now have more funds available for borrowers with smaller deposits.

With national house prices falling around 17% since the November 2021 LVR restrictions took effect, the Reserve Bank believes that the risks that prompted the tightening on bank lending to low equity buyers have reduced.

This is good news for first home buyers who may not be able to save a 20% deposit despite being in a position to service the loans required to enter the property market.

The increase in availability of loan funds for low equity borrowers, the increases to FHG price caps and a general easing of the property market could be signalling a turning of the tide for buyers.

To see how you may be able to take advantage of these market factors and get onto the property ladder, you could contact us or a lender to understand what assistance or options could work for you.

 

 

DISCLAIMER: All the information published in Property eSpeaking 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 eSpeaking 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