Publications
Leasing issues update
Fixing a date
The date written on the top of the document cannot always be taken as
correct, as the recent case of Willmott v Johnson makes clear.
The case involved a vendor who received an offer to purchase some land
from a trust. The vendor signed the offer and also added to the agreement
the full names of the trustees.
The agreement was initially dated 30 November but the purchaser did not
initial the vendor's alteration until 3 December. The agreement was conditional
and the condition was due for satisfaction "within five working days
of this agreement being signed by both parties".
The court found that the agreement had not been made until 3 December,
hence the condition date ran from that date, and not 30 November.
Although the case deals with a real estate sale and purchase agreement,
the decision also applies to agreements to lease.
If a provision in an agreement is triggered from the date of the agreement,
it is important that both parties agree the actual date of the agreement
to avoid potential breaches and disputes.
Think before you consent
A recent English case, Aubergine Enterprises Ltd v Lakewood International
Ltd, has highlighted the danger to landlords of providing indicative
consent before all lease formalities are completed and pre-conditions
have been met.
In this case, the landlord "consented in principle" to the
proposed assignment of the tenant's lease although noting that a formal
deed, which was a condition of consent under the lease, had yet to be
completed.
The judge decided that the "consent in principle" was deemed
to be consent to the assignment despite the fact that some of the conditions
of consent had not yet been fulfilled.
Whilst this was a settlement dispute and did not involve the landlord,
this does serve as a reminder of the importance of properly wording any
correspondence on behalf of the landlord when consent is sought.
Contact us for further advice on the wording that you should use in correspondence
with tenants.
When is a renewal not a renewal?
When it's an extension
The High Court decision of Powell v Tinline Properties Limited
calls into question the common view that a renewal of lease generally
results in the creation of a new lease.
The court confirmed that whilst this is often the case, the right of renewal
could be framed as a right to extend the term.
In that case, any party who leases the premises during the original term
(or any guarantor to that party's obligations) continues to be liable
under the lease provisions until the renewal term(s) of the lease expire.
Although each case must be determined on its own facts (and on the wording
of the lease document involved), this case involved an Auckland District
Law Society (ADLS) Third Edition lease. The new Fourth Edition of the
ADLS lease makes it clear that any further terms are not extensions of
the original term.
If this is an issue for you, we recommend you talk to us further.
Feedback time
In the last edition of our property newsletter we reported the launch
of the new Fourth Edition of the ADLS lease and promised to update you
on initial market reactions.
Although the new version has now been around for a few months, it is not
widely used as yet and many agreements to lease still refer to the Deed
of Lease being prepared in the Third Edition form.
Some landlords are less than keen to use the Fourth Edition as a number
of the amendments (such as the partially modified ratchet) favour the
tenant. The significant advantage for the landlord in using the Fourth
Edition is that the list of outgoings recoverable is slightly wider than
in the previous edition.
However, we have noticed a growing trend of landlords using the Third
Edition and simply amending it to include the extra outgoings from the
Fourth Edition.
For tenants, there are other advantages to using the Fourth Edition,
apart from the modified ratchet, although the downside is the obligation
to pay certain extra outgoings. Some tenants are already deleting these
extra costs when signing up to the Fourth Edition lease form.
As always, the final form of the lease depends on the bargaining power
of each party, but obviously it is important to go into negotiations armed
with the necessary information.
We will be happy to provide you with further information on the differences
between the Third and Fourth Edition ADLS lease.
Disclaimer
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
