Since the declaration of a state of emergency complemented by the implementation of ALERT Level 4, we have been approached by landlords and tenants alike in relation to their rights, obligations and responsibilities under their respective Lease(s).
It is imperative to understand that there is no “one” standard model solution which can be applied during the lockdown period and post-lockdown since each Lease is unique. Presently, while there is no supplementary clause under the Auckland District Law Society (“ADLS”) Lease, under the 6th edition it may seem that there may be some relief for tenants. Pursuant to clause 27.5, the most recent Deed of Lease precedent provides that “if there is an emergency and the tenant is unable to gain access to fully conduct the tenant’s business from the premises, then a fair proportion of rent and outgoings shall cease to be payable.” However, this edition of the Deed of Lease fails to clarify what is considered a fair proportion of rent and outgoings.
As such, this clause remains open to interpretation. It should be noted that Tenants, despite being unable to “gain access to fully conduct the tenant’s business”, are still bound by the Lease and the terms and conditions contained therein. Tenants in most cases are technically still in control of the premises and would have their goods and equipment stored within the premises rendering the landlord unable to effectively gain access without issuing a Property Law Act notice.
Of course, arguments about “rights of termination” will arise and many tenants could try to rely on the doctrine of frustration. However, this can only be relied upon where the Deed of Lease has been drawn up using an earlier “ADLS” Deed of Lease precedent. If tenants seek to rely on the doctrine of frustration or force majeure then it is imperative to comprehend that this would, in most circumstances, only result in the effective suspension of the operation of the Lease and not its termination. The threshold for establishing cause and effect will be very high.
In relation to rent and outgoings payable as a landlord, in practical terms, you cannot compel or force your tenant to pay the due rent and outgoings. At best, in most circumstances you can issue a Property Law Act notice where rent has been due but not paid within ten (10) working days. However, the government has now intervened and announced that it will introduce a Bill to Parliament to extend this timeframe to thirty (30) working days to give both landlords and tenants enough time to negotiate and resolve their issues.
In all, it is important to appreciate the commercial relationship which both the landlord and the tenant have had with each other. Of course, while it may seem to be an easy way for a tenant to simply stop paying rent and wait for a notice, this would only serve to complicate matters further particularly where the tenant is a guarantor under a Lease and there are goods or equipment left at the premises which can be seized by the landlord by way of a Court order. The situation is complex, the law is much more complex and this is complicated further by the fact that most “Agreements to Lease” or “Deeds of Lease” are unique and different and accordingly every situation whether you are a landlord or a tenant will require careful consideration.