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Read it. All of it.
Commercial leases offer no consumer protections. No guaranteed rights. No tribunal to complain to. What you sign is what you get. Every clause matters.
The Fundamental Difference from Residential
The Residential Tenancies Act 1986 gives residential tenants substantial protections. None of these apply to commercial leases. The Property Law Act 2007 provides some basic framework, but commercial tenants negotiate from a position of caveat emptor: buyer beware.
Critical clauses to review.
These clauses can make or break your business. Understand the risk level of each before signing.
Rent Review Mechanism
High RiskThe standard lease offers market, CPI, or fixed rent reviews. Watch for ratchet clauses that prevent rent decreasing even if market rates fall.
Outgoings & Operating Expenses
High RiskYou may be liable for building insurance, rates, management fees, and common area maintenance. Actual costs can differ significantly from budgets.
Make Good & Reinstatement
High RiskAt lease end, you may need to restore the premises to original condition. This can cost tens of thousands.
Personal Guarantees
High RiskLandlords often require directors to personally guarantee the lease. Your personal assets are at risk if the company cannot pay.
Assignment & Subletting
Medium RiskIf your business circumstances change, can you transfer the lease or sublet? Most leases require landlord consent.
No Access & Inaccessibility
Medium RiskWhat happens if you can't access the premises due to emergency, earthquake, or building issues? The default rent abatement is now 50%.
The complete checklist.
Before signing any commercial lease, ensure you've reviewed these elements.
Financial Terms
- Initial rent and when it's payable
- Rent review mechanism and frequency
- Whether rent can decrease (ratchet clauses)
- Outgoings you are liable for
- Bond or bank guarantee requirements
Duration & Exit
- Lease term and commencement date
- Right of renewal terms and notice periods
- Break clause provisions (if any)
- Assignment and subletting rights
- Consequences of early termination
Premises & Use
- Permitted use and exclusivity (if any)
- Signage rights
- Alteration approval process
- Make good obligations at lease end
- Seismic rating disclosure (if specified)
Risk Allocation
- Insurance responsibilities
- Damage and destruction provisions
- No access rent abatement percentage
- Indemnities you are providing
- Personal guarantee scope
Common mistakes tenants make.
Assuming the lease is non-negotiable
Everything is negotiable before you sign. Landlords routinely accept reasonable amendments, especially in a competitive market. Don't accept unfavourable terms without asking.
Focusing only on rent
Outgoings, make good obligations, and renewal terms can cost more than the rent itself over the lease term. Calculate your total occupancy cost.
Not reading the special conditions
The standard terms may be modified by special conditions in the schedule. These often contain the most significant departures from the standard form.
Signing under time pressure
Landlords and agents sometimes create artificial urgency. A few days for proper review is reasonable. If they won't allow it, consider whether this is a landlord you want to deal with.
Hawke's Bay considerations.
Seismic Ratings
For Napier's Art Deco buildings and older commercial stock, verify the %NBS rating independently. The lease may allow disclosure but not warrant it.
Cyclone Gabrielle
Check whether premises sustained damage, what remediation occurred, and whether any insurance claims are ongoing.
Market Conditions
Post-cyclone demand has affected availability and pricing. Ensure lease terms reflect actual market conditions, not inflated post-disaster pricing.
Key Takeaways
Commercial leases have no consumer protections - read everything carefully.
Rent reviews, outgoings, and make good clauses can cost more than the base rent.
Personal guarantees put your own assets at risk.
Everything is negotiable before you sign.
Independent legal review costs little compared to the total commitment.
Related Guide
Navigating a commercial lease? Our step-by-step guide takes you from finding premises through to signing and ongoing obligations.
Read the Commercial Lease GuideRelated Reading
Understanding rent reviews in commercial leases
What rent reviews are, how they work, and why the review mechanism in your lease matters. Covers market reviews, CPI adjustments, fixed increases, and ratchet clauses.
Understanding outgoings in commercial leases
Outgoings are the extra costs tenants pay beyond base rent. Understanding what is included, how they are calculated, and your right to transparency helps you budget accurately.