A New Normal
The impacts of the Covid-19 virus have been felt the world over and have pushed businesses to their limits. Parties on each side of a lease have been left with the job of negotiating through untested and uncertain lease clauses in a time where the support being offered by Government has been unclear and anyone who did hold insurance is discovering that 'pandemics' and 'infectious diseases' are a common policy exemption.
This has left parties with greatly reduced incomes, uncertain obligations, growing liabilities and puts the landlord/tenant relationship to the test.
As the leasing issues being faced in 2020 are resolved and the 'fair' balance for each situation is (hopefully) found we are assisting clients, both tenants and landlords, to prepare for the future of leasing in New Zealand.
We are seeing a growing trend of bank guarantees becoming a landlord's preference (as opposed personal guarantees). In a situation such as Covid-19 the timeframes for a personal guarantee recovery approach are exacerbated. Bank guarantees provide certainty and a clearer process of application/release.
Tenants with businesses which are 'essential' or able to operate under restricted access/without public access (think industrial/automated or food production) are likely to have better negotiating power with landlords. Tenants with businesses affected by the current crisis may be required to offer more/better security than has been traditional. Using this as a negotiation aspect for a renewal or new lease will become common.
Variations to Lease Terms
We foresee desired additions to leases from both sides of the lease as to a definition of what is 'fair' under the lease, the variation of clauses surrounding access to the premises, the introduction of faster solutions/options than mediation and arbitration for dispute resolution and a closer focus on specific wordings of certain clauses e.g. clause 27.5.
Until the ADLS Deed of Lease is amended to account for Covid-19 learnings we see the addition of custom leasing terms as the new normal for any new or renegotiated leases. We can supply these terms and clauses on a bespoke basis to fit your goals and/or concerns.
Signing of Lease Documents
As has been an ongoing trend we see the digital counterparts copy of lease documents becoming the norm with emailed copies to be the regarded as the 'original' moving forward.
Long Term Effects
Handling leasing disputes is a delicate exercise - with a long term relationship and large dollar amounts at stake. Entering and negotiating a new lease is a long term, multi-year, commitment. In both cases, what is agreed at day one can have significant financial ramifications to the parties years down the line.
Talk To Us
Talk to us early, so that we can prepare, overcome and transition your business - as either landlord or tenant - towards the future of leasing.
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© McVeagh Fleming 2020
This article is published for general information purposes only. Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice. If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.