I'd like to know more about the "No Access" clause in lease agreements. Auckland, New Zealand. None. We checked with the

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Customer: Hi there, I'd like to know more about the "No Access" clause in lease agreements
JA: What state are you in? It matters because laws vary by location.
Customer: Auckland, New Zealand
JA: What steps have you taken so far?
Customer: None
JA: Anything else you want the Lawyer to know before I connect you?
Customer: We checked with the landlord about that clause and he said he expects all lease payments to be paid in full.
Answered by Chris The Lawyer in 5 mins 2 years ago
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Chris The Lawyer, Expert

Hi
I am a New Zealand lawyer based in Wellington and will help you with your question today. Please give me a minute to read the question

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Chris The Lawyer, Expert

COMMERCIAL LEASES AND NO ACCESS DUE TO LOCKDOWN

The standard form 6th edition 2012 (version 5) ADLS lease contains updated (post Christchurch earthquakes) clauses that deal with the situation where a tenant cannot access the leased premises “to fully conduct” the tenants business from those premises for reasons associated with an emergency (clauses are found at clauses 27.5 to 27.6 of the Lease) and not the fault of the landlord or tenant.

Where there is an Emergency that prevents access to the premises (damage or destruction to the building is not required) then there the clause requires a suspension of a proportion of rent and outgoings because the premises are inaccessible due to that “Emergency” event.

Emergency is defined in clause 47.1(d) of the second schedule of the lease and includes natural or unnatural event that is not caused by the landlord or tenant, that causes, or may cause: Loss of life, serious injury, illness; or otherwise endanger the safety of the public or property.

Such an event includes:

1. an Explosion;
2. serious fire;
3. earthquake;
4. eruption;
5. tsunami;
6. flood;
7. tornado;
8. cyclone;or
9. epidemic

In an emergency situation, a fair and reasonable proportion of the rent and outgoings shall cease to be payable from the date the tenant was unable to access the premises.

As such, with a declared state of emergency because of a pandemic and a lockdown in effect from midnight Wednesday 25th March the suspension of a fair proportion of rent and outgoings would apply from midnight Wednesday, 25th March until the “inability [to access the leased premises “to fully conduct” the tenants business] ceases”.

This aspect of the clause is not linked to physical damage to the building.

That there must be a cessation of rent and outgoings seems clear the question is: what is a fair proportion? - prima facie you would say 100%. There are no guidelines in the lease. This could be negotiated.

Some amounts of Opex (outgoings) such as a proportion of rates and perhaps other outgoings such as for insurance premiums may still be reasonably charged. It could be arguable that - for a warehouse for example where the primary use is storage a proportion of the rent also could be reasonably still charged.

Older or non ADLS leases won’t necessarily contain this clause.
But may have other abatement clauses

Customer
Number 16 of the schedule 1 of our lease agreement, the Proportion of Outgoings is defined as 100%. So does that mean we don't have to pay 100% of the outgoings? And to my understanding, a lease document is to be read as whole, so doesn't this apply to the rent, even though there is no specific proportion given specifically for "rent"?
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Chris The Lawyer, Expert

If there is a percentage it would apply across rent and outgoings
Customer
Thank you very much, that answers my question. However, I will be in touch if there is any further development. Keep safe!
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Chris The Lawyer, Expert

Also, I'll check back in with you in 7 days on 4/3/2020. I can also answer any additional questions that may arise. Don't worry, there's no additional fee for this follow-up.
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