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BusinessLaw

To Share and Share alike

Business Law, Contracts and Agreements, Due Diligence, Legal Guidance, Shareholder Agreements
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It was just another Monday, as Simon entered his law office, looking forward to slaking his thirst with a comforting cup of tea. He shrugged off his suit jacket and hung it up. While he waited for his computer to wake itself for the day ahead, he made himself a cup of tea.

 

He was just about to have a sip, when the phone rang. He put the tea down. Reception told him that someone was here to see him, no appointment in place, but it was apparently urgent. Taking a last look at his untouched drink, he went downstairs and shook hands with Reggie, who was flustered, Sally’s cousin.

 

“I’m joining someone in an engineering business, it’s all got to be done by tomorrow for some reason, and I’ve got all this paperwork to sign. In fact, I’ve already signed it and was going to hand it over, but Lory said I better come and see you first. Well, she demanded it.”

 

Simon sat Reggie down in an office, and had a look at the papers provided. Reggie was joining two other people in a company which ran the engineering business, he was going to take over from a current owner, and this all had to happen by 31 March for tax reasons. Simon went back to his room, grabbed his favourite pen, ignored the cold cup of tea on his desk, and returned to an expectant Reggie, who said: “We’re all good to go, aren’t we, can I just pay the money and get on with it?”

 

Simon put down the documents, looked at Reggie, and took a deep breath. “Reggie, there are some really important things to think about first:

 

Due Diligence – how well do you know the people you are going into business with? Do they have experience in the industry, in this company, do they have a good reputation? Are they financially sound, can they help bail the company out of trouble if necessary, have they had money problems in the past?

 

Shareholder Agreement – it is essential that you and the other owners sign an agreement which sets out expectations of each other, whether you will need to put more money into the business, who makes decisions, and when do you all have to agree.

 

You should commit to a timeframe where no one can pull out of the business, and if they do they must offer the shares to each other.”

 

Reggie’s eyes were wide open. “Thanks for this, I’ll have a good chat with the others, I won’t sign anything, and I’ll come back and see you shortly.”

 

Simon waved him goodbye, and poured himself a cup of tea. He knew that was not the end of this story.

 

 

Simon Brdanovic

Rent reviews in commercial leases

Business & Employment, Insights & Tips, Landlord & Tenant, Legal Updates, Property & Commercial Leasing
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Methods of review

Two of the most important considerations for parties to a commercial lease are, ‘What is the annual rent?’ and ‘How and when can the rental amount be reviewed?’ The answers are always found in the deed of lease for the premises.

The first schedule of The Law Association Deed of Lease (the most common format for commercial leases) sets out the methodology relating to rent reviews, including the review dates and the review types. There are three main methods of rent review:

  1. Market rent review
  2. CPI (Consumer Price Index) rent adjustment, and
  3. Fixed rent adjustment.

Most leases include a combination of two of the three rent review/adjustment methods, with a common pattern being fixed with market rent reviews on renewal dates.

The Law Association’s Deed of Lease standard terms are discussed below. Care, however, should be taken to ensure the clauses have not been modified in your lease.

 

Market rent review

When conducting a market rent review, either party may give the other party written notice of what the new market rent amount will be from the rent review date.

Notice cannot be given earlier than three months before the relevant rent review date, and it can be given at any time before the next rent review date (regardless of the method of the next rent review). If it is given more than three months after the rent review date, however, the new annual rent amount will only apply from the date of service of the notice rather than the rent review date.

Typically, the rent review process is initiated by the landlord obtaining a market rent valuation to use as the basis for the new rent figure. The other party then has 20 working days to agree, or dispute, the market rent value.

If the new rent value is disputed, the matter will either be decided by an arbitrator or, more commonly, by each party appointing a registered valuer to act as an expert, with the valuers to agree on the market rent value. If the valuers cannot agree on the market rent, a third party appointed jointly by the valuers will decide.

 

CPI rent adjustments

The second method of rent review is a CPI rent adjustment; this follows a formula set out in the deed of lease. CPI rent adjustments can only increase the rent payable, if the CPI rent adjustment results in a lower amount, the rent will remain the same.

CPI adjustments can be popular with landlords as they are less costly and time consuming to complete when compared with market rent reviews.

A drawback, however, is that in high inflation environments, CPI adjustments can result in significantly larger than anticipated rent increases, and the new rent payable may not be reflective of the general market.

It is open to landlords and tenants to agree to a different rent adjusted amount, even if the lease provides for a CPI adjustment, but agreement on rent reviews is not always easy to reach.

 

Fixed rent adjustment

In a fixed rent adjustment situation, the rent will increase by a fixed amount at specified intervals, regardless of changes in the market rent amount or CPI. This method of rent adjustment can provide both the landlord and tenant with certainty on rent amounts moving forward.

 

Limits for a rent review/adjustment

The lease may also provide for a limit for the rent review. Most leases specify that the reviewed/adjusted rent will not be less than the rent payable immediately before the relevant review or adjustment date, which means that the rental amount will either increase or stay the same. It won’t decrease!

Some leases specify that the rent will not be less than the annual rent payable at the commencement of the current lease term. Other leases specify that the rent will not be less than the rent payable at the commencement of the lease, though this is not common. The landlord and tenant are free to agree to an alternative method of limiting rent reviews if it suits their circumstances.

 

Important to understand the process

It is very important for both the landlord and the tenant to understand the rent review processes in the lease, as it can have significant implications for both parties. We can assist if you have any questions on your lease rent review process.

 

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

Terms of trade

Contracts & Documentation, Legal Agreements, Risk Management, Terms & Conditions
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After firming up a child support agreement with Sally and adjusting to his new routine after separating from Sally, Luke decided that he better check in with his business and make sure nothing has fallen by the wayside while he was preoccupied with his separation.

While doing a general review of what’s been happening in the business, he comes across his business’ terms of trade. After having a quick look at the terms of trade he is shocked to see that the terms haven’t been updated in a couple of years. To make matters worse he notices that his terms of trade don’t build in any protection for his business should a customer not pay him for his goods and services. Luke decides to set up a meeting with his lawyers for advice.

At this meeting, Luke gives his terms of trade to his lawyers and explains how his business operates and what terms and conditions he would like to be in place. Luke and his lawyer discuss the importance of regularly reviewing and updating the terms of trade.

A business’ terms of trade are recorded in a written document that set out the relationship between the business and customer, and the terms and conditions that apply to the supply of goods and services.

Luke’s lawyers review his terms of trade, update them to reflect his business needs and make further suggestions on how the terms and conditions should be amended to provide clarity to both Luke and his customers. Importantly, his lawyers made sure that the terms included clauses that set out what would happen if there was a dispute, limited Luke’s liability to the customer, and detailed the business’ rights if a customer didn’t pay.

Luke now felt much more protected using his new terms of trade for his business.

Kristin O’Toole

Business briefs

Business Regulation & Compliance, Consumer & Fair Trading, Employment Law & Workplace Wellbeing, News & Legal Updates, Privacy & Technology
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Commerce Commission – Misleading and deceptive conduct – Noel Leeming

The Commerce Commission has filed criminal charges against electronics retailer Noel Leeming, alleging that its well-known ‘Price Promise’ misled consumers.

 

The retailer had promoted the promise as a guarantee that customers would always receive a match with a competitor’s price. In practice, however, the exclusions and restrictions in the terms and conditions significantly limited the application of this and many shoppers were unable to rely on the promise as advertised.

 

The Commission has alleged multiple breaches of the Fair Trading Act 1986 that prohibits businesses from engaging in misleading and deceptive conduct. The Commission emphasised the importance of large retailers being clear and honest in their advertising. It has previously warned businesses that disclaimers buried in fine print may not be enough to correct misleading impressions.

 

This investigation serves as a reminder to all New Zealand businesses of the importance of ensuring promotional promises are accurate and not undermined by hidden conditions. For consumers, it highlights the need to be cautious of marketing claims that may not tell the full story.

 

Online Casino Gambling Bill

The government has introduced the Online Casino Gambling Bill. This is a significant reform in the gambling sector that would allow online casino operators to be licensed and regulated in New Zealand for the first time.

 

Up to 15 operator licences will be allocated by auction to businesses seeking to offer online casino services to individuals in New Zealand, whether based locally or offshore. It is anticipated that large offshore gambling companies will feature prominently among applicants for the 15 licences. These licences will be valid for three years and renewable for a further period of five years. Operators will be subject to strict conditions, including mandatory age and identity verification, advertising restrictions, harm minimisation obligations and fines of up to $5 million for breaches.

 

While the Bill is intended to facilitate a safe and compliant regulated online casino gambling market, it has attracted strong opposition from more than 50 sporting organisations. Unlike the current Class 4 ‘pokie trusts’ system, which distributes millions each year to grassroots and community sport, the new framework does not require online casino operators to contribute to community funding. Sporting leaders have warned that the change could severely impact local organisations already facing financial pressure due to a lack of funding.

 

The Bill is currently before the select committee and a report on the Bill is due in November 2025.

 

Biometrics Processing Privacy Code 2025

In last summer’s edition of Commercial eSpeaking (#69), we reported on the draft Biometrics Processing Privacy Code. Since then, the Office of the Privacy Commissioner has finalised the Code; this will take effect on 3 November 2025. Organisations already using biometric technologies will have until 3 August 2026 to ensure full compliance.

 

The Code applies to organisations using automated processes to collect and use biometric information – that is, information about a person’s physical features or behavioural traits, such as facial features, fingerprints, voice or eye patterns.

 

The Code introduces 13 rules that go beyond the general information privacy principles in the Privacy Act 2020, requiring businesses that collect biometric data to take a more rigorous and transparent approach. These rules can be broadly categorised in the following way:

 

  • Purpose: Organisations must clearly identify why they are collecting biometric information and ensure that collection is necessary, effective and proportionate to that purpose
  • Safeguards: Adequate privacy protections must be in place before collection, including measures to reduce privacy risks, ensure system accuracy and strengthen security
  • Proportionality: Biometric data should only be collected where there are reasonable grounds to believe that the benefits of collection outweigh the potential privacy impacts on individuals
  • Openness: Individuals must be informed about how their biometric data will be used and disclosed so they can make an informed decision about providing it, and
  • Use limits: The Code places clear limitations on how biometric data can be used and when it may be disclosed.

 

Each rule contains specific obligations that may impact how your business collects, uses and protects biometric information. As a result, it is important that businesses review their biometric systems and policies to ensure compliance with the Code as the effective date (3 November) approaches.

 

To view the full and detailed list of the rules under the Code, please click here.

 

If you need any guidance on any of the above topics, please don’t hesitate to contact us.

 

 

DISCLAIMER: All the information published in Commercial 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 Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2025.     Editor: Adrienne Olsen     E-mail: [email protected]    Ph: 029 286 3650

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