New Zealand: Why agreements to lease are important and necessary

Commercial Property Newsletter - June 2016

Before a landlord and tenant enter into a deed of lease the parties will often enter into a separate agreement to lease document, especially if the lease is negotiated through a real estate agent.

Clients will often ask us 'Why do I need to enter into an agreement to lease? Why can't I just enter into a deed of lease?' The answer is that it depends on your circumstances. In certain situations you can proceed directly to an unconditional deed of lease. However if the parties still need to reach a final consensus on the lease's terms then we would recommend that an agreement to lease is entered into first.

There are two scenarios that immediately come to mind where the parties would benefit from this approach:

  1. A tenant may wish to undertake due diligence investigations of the premises to make sure it will be entirely suitable for their business needs. If the tenant enters into a conditional agreement to lease this will allow them time to assess the premises, while giving the landlord some comfort that the tenant is serious about leasing the property rather than just speculating.
  2. The landlord may need to build the premises or complete certain works to the existing building before the premises is ready to be occupied by the tenant. An agreement to lease can be entered into which clearly sets out the works which the landlord (or the tenant) are expected to do, how the works will be paid for, and when the works will be completed. The agreement to lease would record that the lease will commence once the works are completed. The parties would then enter into the final deed of lease which records the agreed commencement date of the lease, and records the extent of the completed works (as well as who owns each item of fit out).
  3. The benefits of entering into an agreement to lease in this scenario are clear. A landlord will be able to carry out their works in the comfort of knowing that the tenant is legally bound to lease the completed premises. A tenant will know how the premises will look before they take possession.

Important considerations before entering into an agreement to lease in a post-earthquake environment.

  1. Business Use

A lease will set out the purpose for which the tenant is allowed to use the premises. Once this 'business use' is agreed and recorded in the lease document, the tenant will only be allowed to use the premises for a different purpose if the landlord agreed. It is therefore important that the tenant carefully considers what 'business use' is recorded in the lease to ensure that it will be suitable, both now and in the future.

For example if the business use is defined as "retail of footwear" then the tenant would arguably need to ask his landlord to agree if the tenant's business evolved to sell clothing and other accessories as well as shoes. Furthermore such a restrictive business use may make it difficult for the tenant to assign or sublease the premises as any new tenant would also be constrained to selling footwear unless the landlord agreed otherwise. A more general business use of just "retail" would be preferable.

  1. Personal guarantees and lease assignments.

If the tenant is a company or a trust, the landlord will usually require a personal guarantee from either the company's directors or shareholders or the trust's trustees. It is important for any person signing a guarantee to fully understand what their obligations are, and seek the appropriate advice, especially in cases where the business is sold and the lease is assigned to a new owner. It is sometime possible to limit the extent of the guarantee, or have it agreed that the guarantee will be automatically released in certain circumstances.

  1. Term of lease

Lease terms vary and are often subject to changes in the market. However, each lease term should be negotiated on an individual basis. For example, it might not be appropriate for a tenant with a new business to sign up for an initial 6 year lease term given the risk that the business might not succeed beyond the first year or two. The same applies if a tenant with an existing business expects the volume of business to decline in the future.

On the other hand, a lot of the value of a tenant's business may be tied up in the location and the resulting goodwill. In such a scenario the tenant may want to have the option of multiple rights of renewal.

In either cases, the tenant will benefit from negotiating a set of lease terms and renewals that suits their personal circumstances.

From a landlord's perspective, if the tenant wishes to sign up the lease for a long term with multiple rights of renewal, then the landlord may wish to insert a redevelopment clause into the lease. A redevelopment clause will allow the landlord to terminate the lease early if the landlord required the premises for their own purposes.

  1. Care should be taken when using the standard lease forms

The ADLS lease is a specific form of lease which is used in a wide variety of commercial leases throughout New Zealand. Another type of common lease are the Property Council leases which come in a variety forms depending on whether the premises is a retail, office or industrial building.

The standard ADLS agreement to lease contains a clause that states the parties are committed to entering into an ADLS deed of lease. In fact this clause states that the parties have agreed to be bound by the terms and conditions of the ADLS deed of lease whether or not such a document is actually signed.

Both the ADLS and Property Council lease forms are well understood and are perceived to be fairly weighted between the needs of a landlord and a tenant (more or less!). However this does not necessarily mean that it is appropriate to use the standard forms without giving any consideration as to whether they need to be amended to suit the individual circumstances of the lease.

It is important that any further terms or amendments to the eventual deed of lease documents are negotiated before the agreement to lease is signed, or at least agreed during any conditional period of an agreement to lease.

Final words on agreements to lease

There are many benefits to entering into an agreement to lease before proceeding directly to a deed of lease. Regardless of how the parties choose to proceed, it is important that each party obtains separate legal advice before signing any lease document.

You will save time and money by getting the right advice up front, rather than being trapped later on in circumstances which haven't been considered or contemplated. Cavell Leitch are experts in negotiating and advising on lease documents and can assist in negotiating terms that suit your circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Duncan Cotterill
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Duncan Cotterill
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions