Geoff Caradus & Clare North

16 December 2024

The Law Association of New Zealand Incorporated (formerly the Auckland District Law Society) released a new standard form Deed of Lease known as the “Seventh Edition 2024” on 25 November 2024 (together with an associated updated form of Agreement to Lease).

Both documents reflect the evolving market conditions and commercial leasing practices since the release of the previous major re-writes back in 2012. In particular, both documents have been updated to include as optional variables many of the sorts of provisions that tenants and landlords have (until now) often included as amendments to the standard form. We anticipate that the provision of these additional options within the market standard form documentation will:

1. Make recording the agreed position between the parties regarding their subject matter quicker and cheaper (for example, it will no-longer be necessary to draft and include a bespoke bank guarantee clause where it is agreed that a bank guarantee is to be provided); and

2. Bring the subject matter of these additions to the forefront of both parties’ minds – which may well ultimately have the effect of slowly altering market practice.

While there is no substitute for reading the entire document, some of the more notable amendments include:

1. Security options – more options for landlords

The new form introduces greater flexibility for landlords when it comes to security options. In addition to the traditional personal guarantors, the new form provides options for the inclusion of bank guarantees and/or rental bond.

2. Seismic rating – a prompt for discussion but not compulsory

The new form introduces an option for landlords to provide Seismic Rating information to tenants. If a Seismic Rating is inserted (which is optional), the landlord has a continual obligation throughout the lease term to disclose to the tenant any report or information that they are aware of that contains a “materially different assessment” as the initially provided report. Any Seismic Rating stated does not constitute a representation or warranty about the Seismic Rating of the building, and no consequences arise from the building being found to have a different Seismic Rating (although it may well be that the presence of this option causes tenants to turn their mind to this matter more often, and potentially insist upon further amendments).

3. Outgoings – clarified scope and additional landlord’s obligations

The new form clarifies the scope of various outgoings that landlords may recover, but without making any real fundamental changes. Additionally, and more importantly, landlords must also now provide tenants with a detailed budget of outgoings for the upcoming year. Landlords must now also notify tenants of the estimate or actual amount of an outgoing within 24 months of the outgoing being incurred, otherwise the cost will be unrecoverable.

4. Rent reviews – introduction of fixed rent increases

The new form introduces fixed rent increases as an option alongside market and CPI rent reviews. This addition provides parties with greater certainty about future rent payments (as market or CPI adjustments can potentially be more volatile). While fixed rent increases are already common in the market, this additional option makes it easier for parties to incorporate them into the lease without the need for additional extensive drafting.

For market and CPI rent reviews, the new form also provides for a wider range of options beyond the default soft ratchet. The available options have been expanded to include:

• a hard ratchet option (reviewed rent will not be less than the rent payable immediately prior to the relevant rent review or adjustment date),
• a softer ratchet option (reviewed rent will not be less than the rent payable at the commencement date of the initial lease term), and
• an ‘other’ option – allowing for bespoke options, such as caps (upper limit) and collars (lower limit).

5. Tenant’s fixture and fittings – clearer demarcation between landlord’s and tenant’s property

The new form provides for a new Schedule 6 to list the tenant’s fixtures and fittings. This inclusion provides for a clearer distinction, making it easier for valuers to exclude the tenant’s fixture and fittings when conducting a rent review and help enhance clarity when the tenant vacates the premises, reducing potential disputes between the landlord and tenant over ownership and removal.

6. Mortgagee’s consent

Landlords now need to expressly confirm whether they are required to obtain mortgagee’s consent regarding the tenant’s interest under the Deed of Lease.

7. Renewal Notice Period

Parties now have the option to specify a notice period for renewal that is longer or shorter than the previous 3 calendar month requirement.

8. Landlord’s consent to additions and alternations by tenant

The new form now provides that a landlord may withhold consent if an alteration or addition by the tenant would prompt a requirement to upgrade the building, unless the tenant agrees to meet all of the associated costs.

9. Insurance excess

The new form now allows parties the option to specify an insurance excess amount, with the default option increasing from $2,000.00 to $5,000.00. If the insurance excess is increased by the landlord’s insurers as a result of any act or omission of the tenant, the tenant must pay the landlord the increased amount in respect of any future claim on the insurance policy.

10. Compliance with statutes and regulations

The new form introduces specific obligations relating to health and safety on landlords and tenants, including an obligation to comply with the Health and Safety at Work Act 2015. Notably, landlords should also be aware that the right to terminate the lease has been removed if legislation or a competent authority requires them to expend unreasonable sum of moneys to undertake additions or alterations to the premises.

11. No access in emergency rent adjustment

The new form now allows parties the option to specify the percentage of rental abatement in the event the tenant is unable to access the premises in an emergency, with a default abatement of 50% of rent and outgoings. Previously, abatements were based on a ‘fair proportion’ of the rent and outgoings, which could lead to uncertainty or disputes. Parties are now also able to review this percentage for a particular emergency, on grounds that it has become apparent that the percentage specified is not a fair proportion.

12. Damage or destruction of premises

The new form now requires landlords to apply the insurance proceeds they receive, plus the insurance excess, towards reinstating the premises in the event of destruction of the premises. Additionally, if the lease is terminated due to destruction of the premises, landlords now cannot require tenants to reinstate the premises or remove their fixtures, fittings, and chattels from the premises.

Overall, the Seventh Edition Deed of Lease remains a reasonably balanced document for both landlords and tenants. However, given the diversity of landlord – tenant situations, it will continue to be

used as a base document, with amendments and customisation tailored to suit each particular client or situation.

Want to know more?

If you have any questions about how these changes will affect you or your future commercial leasing arrangements, please contact Clare North (clare.north@pittandmoore.co.nz) or Geoff Caradus (geoff.caradus@pittandmoore.co.nz).

By Clare North

19 February 2024

Until this year, New Zealand was one of the few countries in the OECD that did not have a national framework for dam safety. Given the risks posed by New Zealand’s physical geography and the increasingly volatile climate, the Government introduced the Building (Dam Safety) Regulations 2022 in May 2024 to address the risk posed by dams.

The new Regulations apply to dams that are:

• Four or more metres in height with a storage capacity of 20,000 or more cubic metres of water, or other fluid; or

• One or more metres in height with a storage capacity of 40,000 or more cubic metres of water, or other fluid.

The owners of these (classifiable) dams will need to familiarise themselves with their responsibilities under the new Regulations and the Building Act 2004. Owners of dams which fall outside these thresholds (for example, small ‘turkey nest’ dams, irrigation races, stock drinking ponds and weirs) will not be affected by the Regulations.

Under the Regulations, the owners of dams that meet the criteria set out above are required to assess the impact the failure of their dam would have on the local community, historical or cultural places, infrastructure and the environment. This assessment will determine the dam’s Potential Impact Classification (PIC), which will be either low, medium, or high. The PIC must be audited by a Recognised Engineer and then submitted to the regional council for approval. 

The owners of dams, which are categorised as medium or high PIC must then complete a Dam Safety Assurance Programme (DSAP), which must be approved by a Recognised Engineer and submitted to the regional council for approval.

Following approval of their DSAP, dam owners must arrange for a Recognised Engineer to complete an annual compliance audit and prepare a compliance certificate. Dam owners must then review their PIC and DSAP at prescribed intervals.

While most small farm dams, ponds and weirs will be excluded from the Regulations, fines for non-compliance are significant and it will be important for property owners to assess any dams situated on their property. Dam owners have until August 2024 or three months after a dam is commissioned (whatever is later) to submit a PIC to the regional Council and between one and two years to complete a DSAP (depending on whether the dam is classified as medium or high impact).

If you would like to know more about the new Dam Safety Regulations, we would be happy to help, please contact us at Pitt & Moore on 03 548 8349.

By Geoff Caradus

16 November 2021

Up until recently businesses have been relatively free to include aggressive and unfair terms and conditions in their terms of trade and standard form contracts used with other businesses. 

Recent amendments to the Fair Trading Act mean that all businesses will now need to review and update their terms of trade and other standard form commercial contracts used with other businesses to ensure they do not include unfair terms.

What types of contracts are caught?

The amendments are targeted at preventing unfair contracts regime in small (i.e. with a contract value of $250,000 or less per annum) standard form business to business (B2B) contracts. All businesses using standard form contracts which have an annual contract value of $250,000 or less should be reviewed. Standard form contracts used with consumers are already subject to the unfair contracts regime and have been for some time.

What is an unfair contract term?

The Commerce Commission has existing guidance available on its website setting out its view as to what amounts to an unfair contractual term in relation to consumer contracts. That guidance is also helpful in relation to B2B contracts. Further guidance is expected to be released soon.

Obvious examples of unfair terms include heavily one sided termination provisions, unilateral variation provisions and limitations and exclusions of liability. The existing guidance suggests that all terms including seemingly innocuous terms have the ability to be unfair.

Factors a court will take into account when determining if a contractual term is unfair include:

• whether the term would cause a significant imbalance between the parties contractual rights and obligations;
• whether the contract term is not reasonably necessary to protect a legitimate interest of the person who’s benefit it is for;
• whether the term would cause detriment.

The extent of transparency and overall terms of the contract are also relevant.

What are the consequences of using an unfair contract term?

From 16 August 2022 any unfair terms in B2B contracts will be in breach of the Fair Trading Act. As with many other offences of the Fair Trading Act, the consequences of conviction are substantial and may result in a fine of up to $200,000 for an individual, or up to $600,000 for a business.

Key takeaways

Businesses need to ensure their existing terms of trade comply with the new regime. Because of the tight timeframes and volume of work the amendments have created we recommend instructing a specialist commercial lawyer to review your terms of trade as soon as possible.

Because the new requirements significantly curtail the ability of businesses to protect themselves through one-sided contractual terms, we also recommend speaking to your insurance broker or insurer to ensure your existing levels of insurance cover are adequate.

Talk to us

If you would like more in-depth advice or further information about the content of this article, please don’t hesitate to contact Rhys Thompson or Mariam Matti from the Commercial Team. They can be contacted on (03) 548 8349 or rhys.thompson@pittandmoore.co.nz or mariam.matti@pittandmoore.co.nz.

By Rhys Thompson

8 August 2021

In our experience most New Zealand’s businesses are very aware of the need to ensure compliance with their health and safety obligations, but not all are aware of the need to comply with privacy laws.  

All businesses will collect and handle some form of personal information which is subject to New Zealand’s privacy laws and as such need to comply with New Zealand’s privacy laws.

To those not familiar with our privacy laws, the extent of personal information captured is surprisingly broad. It includes personal information collected about people external to the business (e.g. customers) but also people within the business (e.g. employees).  Personal information can take a number of forms and for example may include information held on files, registers, emails, written records and audio and video recordings (including your security cameras).

The types of businesses captured is also very broad and includes most activities undertaken for profit. For example, most mum and dad residential property investors don’t realise that they are subject to and need to comply with privacy laws regarding tenants personal information.

Privacy Officer

The starting point for compliance with privacy laws is appointing a privacy officer. Every business is required by law to have an appointed privacy officer. Your privacy officer can be a person within your business (e.g. a director or senior manager) or an external advisor (e.g. your lawyers). The role of the privacy officer is to encourage and ensure compliance with our privacy laws. In order to meet their obligations the privacy officer will need to be fully engaged with how your businesses collects, uses and disposes of personal information.

If you are looking at appointing an internal privacy officer the Privacy Commissioner has extensive free resources and e-courses available on its website (www.privacy.org.nz).

What’s new

Late last year, the Privacy Act 2020 came into force and made a range of significant updates to New Zealand’s privacy laws. One notable change is a requirement for businesses to notify the Privacy Commissioner where a privacy breach is likely to cause serious harm.

Consequently, it is now recommended that in addition to a privacy policy all businesses have a privacy breach response plan which sets out how you will respond to privacy breaches in a way that complies with New Zealand privacy laws.

What’s at stake?

In terms of legal consequences fines for privacy breaches generally range from around $5,000 to $50,000. However, fines for the most serious of breaches in New Zealand have be known to exceed $150,000. In addition to monetary liability, privacy breaches also have consequences for your business’ reputation.

Governance Responsibilities

If you have an executive or governance function within your organisation you should be asking for a regular privacy reports alongside your health and safety reports. The privacy report should cover a range of matters including your key metrics (privacy disclosure requests, breaches and response and resolution times), details of controls, IT security systems, security audits, timetabling and financing).

Talk to us

If you need advice or assistance with your privacy compliance program get in touch with the team at Pitt and Moore and ask for Rhys Thompson. He can be contacted on (03) 545 7899 or rhys.thompson@pittandmoore.co.nz.