Coronavirus COVID-19 Lockdown - Lease Obligations


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COVID-19 Lockdown – Lease Obligations

 

How does the Lockdown affect lease rights and obligations?

Virtually every business in New Zealand is affected by the lockdown.  Most businesses are prevented from operating their businesses from their normal business premises and are having to work remotely.  This has caused both landlords and tenants to look closely at the terms of their leasing arrangements.

Is the tenant still obliged to pay rent during the lockdown?

Very much will depend upon the terms of the particular lease and the type of leasing arrangements that the parties have.  There are numerous different types of leases, many with different obligations.  Very much will depend upon the terms of the particular lease.

Does your lease agreement have a specific provision providing for an abatement of rent in an emergency situation?

If your lease agreement is the Auckland District Law Society Deed of Lease Sixth Edition then it includes clauses which provide for a “fair proportion” of rent and outgoings to cease if there is an “emergency”.  The lockdown will constitute such an emergency.  If these clauses apply, then the next question is what is a “fair proportion” of rent and outgoings?

Factors such as:

  • the extent to which the tenant is still able to use the premises
  • the precise impact on the tenant’s business because of the inability to access the premises
  • how long the premises cannot be accessed will also be an important factor

Therefore what is “fair” is different in each situation.

Does your lease agreement have a force majeure clause?

A force majeure clause excuses a party from their obligations and liabilities if they are prevented from acting because of a specified event. However force majeure clauses are often drafted differently and the terms can vary from lease to lease.

Do the general lease provisions of the Property Law Act 2007 apply?

If they are not excluded then certain provisions of the Property Law Act are implied in leases.

The Doctrine of Frustration whereby parties are released from their obligations if there is an intervening event which prevents the parties from complying with their obligations may also have application.

We expect that most landlords and tenants will be closely reviewing their leases in order to ascertain how their obligations may have changed.

The Government may also at some stage consider providing targeted rent relief to businesses who are under financial stress as a result of the epidemic.

ABMM has an experienced Property Team and we would be happy to assist in this review. 

Please contact:

contact@abmm.co.nz or call 06 757 5183

They are all able to provide the necessary advice on what can be very complicated issues in these very difficult times for all. It is essential that both parties are aware of their obligations and how these may have changed.

 

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