Commercial lease agreement template nz

This range of New Zealand commercial lease agreements allow for the letting of a number of properties from a restaurant to a unit in an industrial park.

Commercial leases are governed by the NZ PROPERTY LAW ACT 2007.

What should be included in the lease agreement?

In order to be valid, a commercial lease must include the following elements:

• The lease must be for a time period that is certain, unless the lease is periodic (see below).
• The leased premises must be certain.
• The tenant must be granted the legal right of exclusive possession of the property.
• The lease must be properly created as a legal contract.

The parties are at liberty to negotiate specific terms in the lease agreement that suit their particular requirements. Because of the nature of commercial property and its uses, the parties may wish to provide in the agreement for issues such as ownership of fixtures and fittings and the intended uses of the property. Read How to enter into a commercial lease within New Zealand to further understand issues involved.

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Lease of commercial premises no guarantor

A lease for commercial premises with no Guarantor. The lease contains provisions for payment of rental, outgoings and a process for rental review to market value. Suitable for use throughout New Zealand.

Lease of commercial premises with guarantor

A lease for commercial premises with a Guarantor. The lease contains provisions for payment of rental, outgoings and a process for rental review to market value. Suitable for use throughout New Zealand.

buy a commercial property

How to buy a commercial property within New Zealand

Finding your property

If you are intending to buy a New Zealand commercial property, you should contact a real estate agent specialising in commercial property.

Obtaining information on the property

If you find a suitable property you should have a valuation prepared for it. You should also obtain a Land Information Memorandum (LIM) on the property from your local council. These documents will provide you with much information important in assessing the property's value and potential uses.

The LIM will include, among other things, any special characteristics, the permitted uses of the land, and any relevant consents or notices issued by the council. See How to obtain a Land Information Memorandum (LIM).

What should be the ownership vehicle for the purchase?

You will need to decide what type of entity you should use to buy the property. The options include:

• buying as an individual
• buying through a company (see How to form a company)
• buying through a trust (see How to form a trust)

Your lawyer and accountant will help you in deciding on the best ownership vehicle for your situation.

The return from the property

The basis of any successful purchase of a commercial property is the return from the property. The value of the lease is therefore paramount. You should check the term of the existing lease and the financial strength of the tenant. Where the tenant is a company, you should check whether any personal guarantee has been given by a representative of the company. For information on commercial leases generally, see How to enter into a commercial lease.

Making an offer

Before you make any offer on the property you should discuss it with your lawyer.

If this is not practicable, you should make the offer conditional on your lawyer giving his or her approval that the title to the property is in order, and also his or her approval of zoning matters and of any matters disclosed by the Land Information Memorandum obtained from the council.

Your offer should also be subject to your approval of the terms and conditions of all leases and, where appropriate, to your borrowing being approved on terms satisfactory to you.

Cautionary notes

• At an early stage it is advisable to discuss with your bank the upper limits for any borrowing that you may need to do.
• A lawyer will ensure that all documents are correct and will generally protect your interests. As well as checking the LIM, your lawyer will check the certificate of title to ensure that any prior mortgages are discharged and that any easements are correctly established (see How to create an easement). Your lawyer will also advise you on relevant tax matters such as whether the purchase price includes or excludes GST.

structure your ownership of a rental or investment property

How to structure your ownership of a rental or investment property within NZ

Introduction

Once you have decided to buy a New Zealand investment property you should decide what type of "vehicle" you would like to use in order to create an investment that works most to your advantage. You should obtain professional advice from a lawyer and an accountant as to the preferred entity in whose name the property is to be bought, and as to issues such as GST.

The "family vehicle"

Using what is called the "family vehicle" involves ensuring that any income earned from the investment property will accrue in the name of a family member in a lower tax bracket.

On the other hand, you may buy a property knowing that for a few years it may run at a loss, but expecting that it will ultimately produce a profit. In the short term it will be advantageous to put the property in the name of a family member with a higher income, and therefore the resulting loss can be offset against the higher income in a few years' time.

Company

Another traditional "vehicle" that can be used is a company (see How to form a company). A company provides you with considerable flexibility, enabling you to make changes in the ownership of the property by transferring shares without incurring stamp duty and legal expenses. These changes of ownership can be simple accounting arrangements that allow you to remain in the driving seat.

Family trust

Another option for families is to buy the investment property through a family trust (see How to create a trust). Trusts allow you flexibility in distributing capital and income to the parties to whom you wish to apply it. You can also combine a trust with a company and thereby obtain the benefits of both.

Cautionary notes

• The Inland Revenue Department will allow a property to run at a loss and that loss to be offset against other income, provided there is a real prospect of the enterprise turning a profit within a reasonable time. If the prospect of profit is too far down the track, then you run the risk of the arrangement being disallowed. There are many advantages to be gained from a proper understanding of the tax system, and you should therefore obtain advice on this from a lawyer or accountant.

enter into commercial lease

How to enter into a commercial lease within New Zealand

Introduction

The main difference between a commercial lease (or "tenancy") and a residential lease is that the RESIDENTIAL TENANCIES ACT 1986 does not apply to commercial leases. Commercial leases are instead governed by the NZ PROPERTY LAW ACT 2007.

With a lease the landlord is referred to as the "lessor" and the tenant is referred to as the "lessee".

What should be included in the lease agreement?

In order to be valid, a commercial lease must include the following elements:

• The lease must be for a time period that is certain, unless the lease is periodic (see below).
• The leased premises must be certain.
• The tenant must be granted the legal right of exclusive possession of the property.
• The lease must be properly created as a legal contract.

A lease will ordinarily be in writing, although this is not necessary for the lease to be valid. A written lease ensures that the parties know exactly what their rights and obligations are.

The parties are at liberty to negotiate specific terms in the lease agreement that suit their particular requirements. Because of the nature of commercial property and its uses, the parties may wish to provide in the agreement for issues such as ownership of fixtures and fittings and the intended uses of the property.

Periodic and fixed-term leases

An important distinction is between periodic and fixed-term leases. With a periodic lease there is no requirement for the beginning and end of the lease to be certain; instead, the lease ends on notice being given by either party. A fixed-term lease, on the other hand, requires a certain duration for the lease – that is, a certain starting and ending time.

If the lease agreement does not specify otherwise, a lease will be a monthly periodic lease, which means that either party can terminate it by one month's notice in writing.

The landlord or tenant may be a company

Frequently one, if not both, of the parties to the lease will be a company. A landlord (lessor) may require a personal guarantee from a representative of the company, usually a director or major shareholder. The effect of this is that the guarantor will be personally liable for any amount owed by the company in the future.

The rights and obligations of the parties

The rights and obligations of the landlord and tenant are provided for in the PROPERTY LAW ACT 2007, and are implied by the law into all commercial leases. These include the following:

• The tenant (the lessee) must pay the rent when it is due under the lease.
• The tenant must keep the premises in good repair.
• The landlord (the lessor) is entitled to enter the premises at all reasonable times to view the state of repair. The landlord can serve the tenant with a notice requiring the tenant to repair any defect within a reasonable period of time specified in the notice.
• The landlord may re-enter the premises if the rent (or part of it) is in arrears for a period of 21 days. The landlord can also re-enter if the tenant has failed to perform or observe any of the terms of the lease. The landlord can exercise these rights to re-enter the premises either personally or through an agent. If the landlord does re-enter, this does not relieve the tenant of liability for the overdue rent or other breach.

Registration of leases

The parties have the option of protecting their interests by registering the lease on the Certificate of Title for the property.

Cautionary notes

• With commercial leases often very large amounts of money will be involved. Given the changeable nature of business life, it is very important that certainty is achieved as far as possible by providing in the lease agreement for any disputes or other difficulties that may arise.
• The rights and obligations that arise under commercial property law may lead to harsh consequences for one or other of the parties. It is therefore strongly recommended that in negotiating a lease you seek advice from a property lawyer who specialises in this area.

Lease of Commercial Unit Title Premises with Guarantor

A lease for commercial Unit Title premises with Guarantor. The lease contains provisions for payment of rental, outgoings and a process for rental review to market value.

Lease of Commercial Unit Title Premises without Guarantor

A lease for commercial Unit Title premises with no Guarantor. The lease contains provisions for payment of rental, outgoings and a process for rental review to market value.

Guarantee of lease following assignment

A Guarantee of a Lease given as a requirement of landlord consent on the sale/assignment of a lease form one tenant to another. Suitable for use throughout New Zealand.

Business lease: suite of offices

This lease is for letting part of a multi-tenanted building for offices or business purposes. The building could be a modern office block or offices above retail space. Suitable for use throughout New Zealand.

Business lease: unit on industrial park

A comprehensive, business lease for a unit on an industrial estate or a business park. The use could be for any purpose, such as a workshop, factory, depot or warehouse. Suitable for use throughout New Zealand.

Business lease: land, either vacant or with plant or buildings

A lease of land for any business use, for example, plant or equipment storage or a scrap yard. The lease provides for use of any buildings and/or items of plant on the property. Suitable for use throughout New Zealand.

Lease agreement: pub or restaurant with flat over

This is a comprehensive lease for letting a pub or licensed restaurant with a flat or maisonette above for the tenant to live. The premises may be detached or connected. Suitable for use throughout New Zealand.

Business lease: detached office building on business park

This lease is drawn for use by a landlord letting a self contained office building on his business park. Suitable for use throughout New Zealand.

Self contained office lease agreement

This is an easy to use lease for letting the whole of an office building to a single tenant for business purposes. Suitable for use throughout New Zealand.

Business lease: offices above shop

This is a comprehensive but uncomplicated business premises lease for letting self contained office or storage space above a shop or other workspace. Suitable for use throughout New Zealand.

Restaurant lease agreement

This letting agreement is for any property with a commercial kitchen. That is, a restaurant, cafe, delicatessen or fast food outlet. The lease allows for the property to have space used for other business purposes too, such as offices above. Suitable for use throughout New Zealand.

Business lease: shop in parade

This lease is for letting a single shop or retail unit in a multi-tenant parade owned by the same landlord. Suitable for use throughout New Zealand.

Shop lease agreement

This is a lease for a self contained lock-up shop. It could be in a parade or detached. It does not require provision for service charge recovery. Suitable for use throughout New Zealand.

Workshop lease agreement

This is a comprehensive and easy to use lease for letting a workshop, barn or other self contained building of any size, for industrial, storage or mixed use. Suitable for use throughout New Zealand.

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