15/04/2020
This from the Property Law Section chair:
COVID-19 – property update: commercial leases and mortgages
The Property Law Section has been working with the Ministry of Justice to develop guidance and information around the issues affecting commercial leases and mortgages during the COVID-19 Level 4 Alert.
Property Law Act default notice periods
The PLS welcomes the government’s efforts to provide some assistance by extending the length of default notice periods under the Property Law Act. It acknowledges, however, that some landlords and tenants might have been hoping for greater relief.
Rent agreements
Where the applicable lease is the ADLS 6th edition, the parties will need to reach agreement as to what is a ‘fair proportion’ for the purposes of clause 27.5, i.e. they are working within the scope of an existing term of the lease (akin to agreeing a rent review). We do not see this as a variation of the lease as such. The parties should, however, ensure that they are in agreement as to what is a ‘fair proportion’ (they need to have a meeting of the minds on this). They should also ideally have this recorded in writing. Your client (landlord or tenant) should also check that the person they are dealing
with has the authority to bind the landlord or tenant (respectively). If they are unsure, they should (in their email) state that they presume the person has authority to bind the
landlord or tenant (as applicable) and will be proceeding on that basis unless they hear back to the contrary.
For those that are not on the ADLS 6th edition lease and have no other contractual right (under their lease) to a rent abatement, they are moving into territory outside the scope of
the existing lease terms in doing any deal with the landlord regarding rent abatement. Accordingly, we consider that this would amount to a variation of the lease. A full lease variation in the circumstances might not be possible. This could be documented by simple email exchange, but it will be important to ensure the requirements for a valid contract relating to land are met. We recommend that the email exchange (or other
written agreement) should refer to the agreement being treated as a variation of the lease.
Duncan Terris
Property Law Section Chair
