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Lease Renewals – don’t overlook those important dates.
Landlords and tenants, must ensure that they diary future rent review, renewal and expiry dates in respect of any existing commercial leases.
The majority fo commercial tenancies are on one of the Auckland District Law Society (“ADLS”) Deed of Lease* forms. and, in the main, the provisions of the last few versions have remained consistent in relation to notice periods for renewals and rent reviews.
A tenant wishing to exercise a right of renewal available to it must give the landlord at least three months’ (prior to the expiry date of the lease) written notice of its intention to renew. We therefore recommend that tenants put an entry in their diary at least four months out from the end of the current term (longer if a decision on whether or not to renew might be an involved, and lengthy, process) so as to ensure notice is given in plenty of time.
Three months is also usually the ‘magic number’ for rent reviews. When a review is due, previously the landlord, but more recently either party. You need to check your lease and know the time frames that apply to you. You can usually serve notice proposing a new rent at any time from three months prior to the review date. Service of the notice ‘kicks off’ the review process. Again, we recommend both landlords and tenants diary at least four months prior to a given rent review date in order to sort out valuations (if required) and determination of the proposed new rent in advance of actually serving notice.
Even when a lease is due to come to an end simply by virtue of the current term running out, then a landlord should be setting up a reminder in advance of the expiry date so that matters such as removal of a tenant fixtures and fittings can be resolved in advance.
If the tenant has a right to renew which it has failed to exercise then, the landlord may be prepared to let the tenant stay, but the lease documents should be updated.
Thought for the day – get your diary sorted out!
Article is supplied by East Brewster Ltd in Rotorua – Commercial and Property Law Specialists