Both landlords and tenants are turning to their leases to determine whether the lease contains Clause 27.5.
The lockdown has for many businesses become a lockout when it comes to access to commercial premises.
April, 2020
Both landlords and tenants are turning to their leases to determine whether the lease contains Clause 27.5.
This clause was inserted into the standard ADLS lease agreement after the Christchurch earthquakes and seeks to address situations where a National emergency impacts a tenant’s ability to access their commercial premises.
There seems now to be a consensus amongst the legal fraternity that this clause does apply to our current COVID 19 lockdown crisis.
There the clause imposes an obligation on a lessor to negotiate a fair and reasonable concession on rent with the tenant due to the tenant’s inability to utilise the space.
Unfortunately, this is where the consensus of opinion ends as there are no clear guidelines on what is fair and reasonable under these circumstances to both parties.
Issues exist with respect to the extent and degree that premises are still being used despite the business being in lockdown. Computer server rooms and archive space are arguably still being used by the tenant despite access being denied.
The advice we have is firstly to check whether clause 27.5 is present in your lease agreement whether you are a tenant or a landlord. If it is present get in contact and begin a discussion over what you both consider fair and reasonable under the circumstances. Consider both the rent and the buildings Operating expenses and try to conduct your discussion with empathy for each other position. Being flexible and reasonable at a time like this will ensure the relationship you have with each other that will be important when the lockdown ends is not damaged by the need to address a negotiation now.
