The Law Association of New Zealand has updated its standard form Deed of Lease (Seventh Edition) to reflect changes in law and practice since the release of its predecessor in 2012. Some of these key changes include rent review options, health and safety obligations, landlord outgoings, and insurance cover.
Rent reviews
The new edition introduces the option of a fixed rent adjustment alongside the existing market rent and CPI adjustment methods. It also offers a more comprehensive range of rent review mechanisms, including the ability to set both lower and upper rent limits.
These options allow parties to specify whether the reviewed rent:
- Cannot be lower than the rent immediately prior to the review (hard ratchet);
- Cannot be lower than the rent at the start of the current lease term (soft ratchet); or
- Cannot be lower than the rent at the start of the initial lease (even softer ratchet).
Outgoings
The list of outgoings that a landlord will be able to recover from a tenant has been expanded and clarified to be stricter on the requirements for charging them. For example, landlords will now be required to provide the Tenant with a budget of outgoings, to allow Tenants to have a better picture of any expected expenses.
No access in an emergency
The new edition addresses rent adjustments if tenants cannot access the premises due to an emergency. It sets the fair proportion of rent payable during this period at 50%. Either the tenant or landlord can terminate the lease if the tenant cannot access the premises for a certain period or it’s reasonably expected they won’t regain access.
Security options
The lease now offers different security options in case of tenant default, such as bank guarantees or rental bonds.
Health and safety
The form explicitly refers to obligations under the Health and Safety at Work Act 2015, covering landlords’ and tenants’ duties to ensure the health and safety of workers or anyone affected by their activities.
Renewals
Clause 34.1, which sets the notice period for a tenant to renew the lease, has been amended to provide more flexibility. While the default minimum notice remains three months, Clause 7 of the First Schedule now allows the parties to specify a different period. The renewal clause has also been updated to align with the applicable rent review mechanism (market, CPI, or fixed adjustment) and to clarify the security requirements for a renewed term, which might be particularly important where the lease has been assigned before renewal.
Seismic ratings
Landlords will now be able to specify the seismic ratings of the building in the Lease. While landlords will have to inform tenants if they become aware of a materially different assessment, the clause states that there will not be any consequences if a different rating is found.
Insurance
The default amount the tenant will have to pay for insurance excess has increased from $2000 to $5000 in the seventh edition. There is also an option to specify a different excess amount.
What this means for you
The new standard form brings significant changes designed to provide greater flexibility and reflect current legal requirements. While it remains a strong starting point, it’s important to carefully review the lease terms in any commercial leasing transaction and seek legal advice to understand how these updates may affect you.
