Essential Updates in the New Edition of the Deed of Lease

7 March, 2025 | Chantal Laidler

The Law Association of New Zealand recently released the latest edition of their commonly used Deed of Lease for commercial premises and we outline some key changes to look out for, whether you are the Landlord or Tenant.

Rent Review Options

The new edition includes a new option of fixed rent adjustment dates, alongside the existing CPI rent review and market rent review. This option provides certainty for both parties compared to the irregularity which can arise from both market rent reviews and CPI increases. The fixed rent adjustment can be framed as either a percentage or a dollar amount increase.

New ratchet options have also been included in the First Schedule, which are relevant to CPI rent adjustments and market rent reviews. There are three options to choose from, briefly outlined below;

1. a soft ratchet which provides that the rent will not be less than the annual rent payable at the commencement date, unless the review is a renewal date in which case the annual rent will not be less than the rent payable at the start of the immediately preceding term of lease;
2. a hard ratchet which provides that the rent will not be less than the rent payable immediately prior to the relevant review; or
3. a softer ratchet which sets out that the annual rent payable will not be less than the rent payable at the commencement date of the initial lease.

There is also an option where caps on rent review, or specific amounts or percentages may be used.

Where no option is selected, the first soft ratchet option will be the default.

Renewal of Lease

The notice period now specifies that the Tenant must give the Landlord three (3) months notice where they wish to exercise a right of renewal, unless a different notice period is specified in the first schedule.

Outgoings

The new edition widens the parameters of what Landlord’s may charge, but also sets out that capital costs are not chargeable to the Tenant. This provides greater transparency and sets out clearer expectations for both parties.

The Second Schedule now requires the Landlord to provide budgeted outgoings to the Tenant every year for the following year (or as otherwise specified in writing).

Bank Guarantees and Rental Bonds

There is now specific drafting for bank guarantees and rental bonds (giving security to the Landlord that rent obligations can be met).

The Bank Guarantee or Rental Bond amounts will specify a dollar amount or a number of month’s rental – and provide more certainty for both parties that the terms are well drafted and reasonable.

Seismic Rating

A seismic rating clause has now been included, with an option to specify the seismic strength rating of the building. Tenants should ask their Landlord whether they have had an assessment on the building, and if so, request a copy of the report.

Health and Safety

Under the Health and Safety at Work Act 2015, both the Landlord and Tenant are defined as PCBU’s (person conducting a business or undertaking) and therefore have an overarching duty for people’s health and safety. The Landlord and Tenant must work together to provide an environment where risks are identified and eliminated, where possible. The requirement to co-operate and co-ordinate activities with other PCBU’s is legislated in section 34 of the Act, and those who fail to comply with this obligation may face a fine.

Overall, there are many new provisions which both Landlord’s and Tenant’s need to ensure they understand before entering into a Deed of Lease using the new edition. Talk to Chantal Laidler at Smith and Partners to ensure that your intentions are met at the outset of your Landlord-Tenant relationship.

Want to know more?

Complete the form below, and we will get back to you promptly, or contact Chantal Laidler on 09 837 6833 or email chantal.laidler@smithpartners.co.nz.