Taranaki Property Investors' Association

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09-07-2012

Christchurch owners go to court over leases

Landlords.co.nz

Hundreds of commercial landlords and their tenants in Christchurch have been forced to reach for their dictionaries since the city’s earthquakes.

By Susan Edmunds

Peter Smith, of Smith and Partners, said commercial leases were generally straightforward in that they were governed by an act of Parliament and often followed a set form.

But the Christchurch earthquake had highlighted the fact that from time to time events happened that had not be contemplated when the leases were drawn up, and could cause a few problems.

“There’s been argument over the definition of the word ‘untenantable’. There have been court cases arguing about what it means.”

Smith said there had been so many that even his Auckland-based firm had been involved.

He said the courts had decided that because a lease was a permanent arrangement, damage must be permanent, too, if it was to cause the end of a lease.

If the building was not completely written off, the tenant could not get out of the lease and had to come to an arrangement with the landlord until the building was tenantable again.

Smith said he had heard of cases where both sides used damage as a reason to try to break the lease unsuccessfully.

But he said most cases were being resolved, now the law had been tested in court enough times.

He had worked with one tenant who wanted to cancel a lease because of the length of time reconstruction was going to take. He said the landlord in that case was very understanding.

At the time of the first earthquakes, Evan Harris, a director of Colliers International Property Manager, said that the earthquake showed that many commercial leases didn’t consider the problems that tenants and landlords would encounter when there was structural damage.

He said there was often confusion about who had to pay for repairs.

Office spaces were usually leased empty and tenants broke them into smaller offices by installing walls. 

But if an earthquake separated the partitioning walls from the structural columns, "is that the tenant's fault or the landlord's fault? the landlord owns the column and the tenant ows the partitioning," Harris said.

Tags: peter smith

Source: Landlords.co.nz

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