No-access clause for all commercial leases
No-access clause for all commercial leases
Friday 29 October, 2021
The Government passed the COVID-19 Response (Management Measures) Legislation Bill on 28 October 2021, which will amend the Property Law Act to imply a ‘no access’ clause into commercial leases which do not already provide for adjusted rent payment terms during an epidemic emergency.
Businesses using the 6th edition of the Auckland District Law Society (ADLS) commercial lease have a clause allowing for the parties to agree a “fair proportion” of rent and outgoings that should be abated during an emergency if they cannot access the property to fully conduct their business (a ‘no access’ clause). This clause has been widely used by commercial landlords and tenants, particularly during Alert Levels 3 and 4.
However, older editions of the ADLS commercial lease do not have this clause. In addition, businesses with custom leases, such as shopping mall leases, are often very landlord-focused and may not contain a ‘no access’ clause. Businesses without ‘no access’ clauses have been liable to pay full rent throughout the COVID-19 pandemic, although many landlords and tenants have negotiated rent reductions even without a ‘no access’ clause.
This amendment has been welcomed by affected tenants but came as a surprise to many in the Property Industry, as the Government introduced it without prior consultation or warning and took only a month from introduction to pass the Bill. As in situations where a commercial lease contains the ‘no access’ clause, the parties will need to agree on what is a fair rent reduction. If they cannot agree, they will have to submit to arbitration, unless they can agree on an alternative dispute resolution process such as mediation.
The amendment will apply retrospectively from 18 August 2021, the date of the most recent rise in Alert Levels, but will not affect agreements between landlords and tenants to adjust rent obligations made prior to that date.
Tompkins Wake has worked closely with landlords and tenants since the start of the COVID-19 pandemic to reach agreement on what is a fair reduction in rent.
If you have questions about how this amendment will affect your lease, our commercial property experts can help.
