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Landlords and Tenants of commercial premises and the Property Law Act 2007 - August 2008

The new Property Law Act 2007 came into force on 1 January 2008. A number of the provisions in the Act relate to leases of commercial premises. The overall effect of those provisions is to provide additional protection to tenants. The Act does not apply to residential tenancies. Some key changes are:

  1. Unless the lease expressly prohibits any assignment, sublease, change in use or mortgage, a landlord cannot unreasonably withhold or delay consent to those matters and must give notice of the landlord's decision to the tenant within a reasonable time.

    A common situation will be where a tenant wishes to assign a lease. If the landlord decides not to consent or wishes to impose a condition on the landlord's consent, then the landlord is required to give reasons for that. It will be considered unreasonable if the landlord requires payment of money from a tenant for the granting of consent or if the landlord refuses to consent because the tenant is bankrupt or in receivership or liquidation.

    Where there is any other type of situation where a landlord's consent is required (for example, consent to make alterations), in leases entered into after 1 January 2008 a landlord cannot unreasonably withhold or delay consent and, again, must give notice of the landlord's decision to the tenant within a reasonable time.
  2. Another provision in the Act codifies the rule that a tenant who assigns the lease will remain liable to the landlord for payment of rent etc during the term of the lease. If the landlord and assignee agree to extend the term of the lease, the original tenant will not be liable during the extended term unless it agrees to the extended term.
  3. In the past, landlords have had a right to take tenant's property from the premises when rent had not been paid. That right has now been abolished.
  4. New notice provisions must be complied with by landlords if they wish to cancel a lease or if they do not wish to renew a lease. If a landlord wants to cancel a lease because a tenant owes the landlord money, the landlord must give one type of notice for rent owing and another type of notice for other money owing. "Other money" includes rates, insurance premiums and body corporate levies.
  5. Another important change, which applies to all leases, relates to damage and destruction. As long as the damage is not caused by an intentional or criminal act on the part of the tenant, a landlord can no longer require a tenant to make good the damage where the tenant pays for the landlord's insurance as part of the tenants lease obligations.

The above is an outline only of some of the changes brought about by the new Act. You should seek legal advice in relation to those issues which are particularly relevant to your situation.

Contact Tony Walker on DDI 303 9916 or Sarah Edmondson on DDI 303 9915.

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