Commercial leasing in New Zealand has its own vocabulary. Whether you are signing your first lease as a tenant, acquiring an investment property, or reviewing a lease before renewal, understanding the terminology is essential to knowing what you are actually agreeing to. This glossary-style guide unpacks the most common terms encountered in New Zealand commercial leases, with particular reference to the Auckland District Law Society (ADLS)/REINZ Deed of Lease Sixth Edition 2012 — the standard form used across most commercial leasing transactions in this country.
The ADLS Deed of Lease — The Starting Point
Almost every commercial lease in New Zealand starts from the ADLS/REINZ Deed of Lease. The Sixth Edition (2012) is the current standard. It covers the mechanics of how rent is paid, how the property is to be maintained, what happens in a dispute, and how the lease ends.
The key commercial terms — rent, term, rent review dates, options to renew, permitted use, and fit-out obligations — are recorded in the “Agreement to Lease” schedule that sits in front of the deed. This schedule is negotiated between the parties; the deed itself forms the standard legal framework.
When a landlord or agent says “we use the standard ADLS lease,” they mean they start from this template. It does not mean every clause is non-negotiable — it means the baseline is well understood by both sides.
Understanding Lease Structures
| Lease Type | Who pays base rent | Who pays outgoings (OPEX) | Common in NZ? |
|---|---|---|---|
| Gross lease | Tenant | Landlord (built into rent) | Less common |
| Net lease | Tenant | Tenant (on top of rent) | Most common |
| Gross + partial OPEX | Tenant | Split — varies by clause | Some retail/office leases |
Gross lease: The landlord is responsible for paying all property-related outgoings — rates, insurance, maintenance — out of the rent received. The tenant pays a single, higher rent figure. This is simpler for tenants but less common in New Zealand commercial leasing.
Net lease: The most common structure in New Zealand. The tenant pays a base rent plus their proportionate share of operating expenses. This means the tenant’s true occupancy cost is base rent plus OPEX — always model both figures before comparing properties.
Key Lease Agreement Terms
Lease commencement date vs rent commencement date
These are often different dates, and mixing them up is a common mistake.
The lease commencement date is when the lease term starts and the tenant’s obligations (maintenance, compliance, insurance) kick in.
The rent commencement date is when rent becomes payable. A landlord may grant a rent-free period — say, three months — to allow the tenant to fit out the premises before trading. During this period, the lease is running (so the tenant has access and maintenance obligations) but no rent is due.
Always check both dates in the agreement to lease schedule and confirm how any rent-free period is structured.
Lease expiry date
The date the current term ends. The tenant must vacate unless the lease is renewed or extended. Failure to vacate on time can make the tenant a “holdover tenant,” which triggers different legal and financial consequences under the ADLS lease — typically, the landlord can claim double rent for the holdover period.
Option to renew
An option to renew gives the tenant the right (but not the obligation) to extend the lease for a further term at agreed conditions. Options are valuable — they provide tenure security without locking the tenant in. Critical points:
- Notice requirements are strict. Under the ADLS Sixth Edition, the tenant must give written notice within a specific window (often 3–6 months before expiry). Miss it, and the option can be lost — though the Property Law Act 2007 provides some relief in certain circumstances.
- Rent on renewal is often subject to market review. This means the rent you pay in the renewal term may be reassessed at current market rates before the new term begins.
- Renewal periods often coincide with rent review dates. If you exercise an option to renew and rent is simultaneously reviewed to market, you may face a significant rent increase at the start of the new term.
Options to renew are only valuable if you exercise them on time. Diarise the notice window the day you sign the lease — do not rely on your landlord to remind you.
Rent and Rent Reviews
Base rent
The fixed annual rent payable by the tenant, expressed as an annual figure (paid monthly or fortnightly in advance). In New Zealand, rent is typically paid one month in advance.
Operating expenses (OPEX) / outgoings
The variable costs of operating the building that the tenant contributes to under a net lease. These typically include:
- Council rates
- Building insurance (landlord’s policy)
- Body corporate levies (if applicable)
- Building management fees
- Common area maintenance and cleaning
- Utilities for common areas
Always ask for the most recent OPEX budget before signing. In a large complex with significant common area obligations, OPEX can add 20–40% to the stated base rent.
Fixed rent review
A predetermined rent adjustment at specified intervals — for example, 2.5% increase on every anniversary of the commencement date, or a fixed dollar increase every two years. Advantages: certainty and no administrative burden. Disadvantage for landlords: if market rents rise faster than the fixed rate, the landlord misses upside. This mechanism is straightforward and low-conflict.
Consumer Price Index (CPI) rent review
The rent is adjusted in line with changes in the CPI — Statistics New Zealand’s measure of inflation. A typical formula might be “rent adjusted by CPI movement, subject to a minimum 1% and maximum 5% increase.” CPI reviews maintain the real value of rent against inflation. They do not capture property value growth above inflation.
Market rent review
Rent is assessed at the prevailing market rate for comparable properties at the review date. This requires engagement of a registered valuer (usually one appointed by each party) who provides independent assessments of market rent. If the parties cannot agree, the ADLS Sixth Edition provides an arbitration mechanism.
Market reviews are the most contested type of rent review. The subjectivity of “comparable properties” and “market conditions” creates room for disagreement — particularly in thin markets where there are few genuine comparators.
In New Zealand, it is not common for rent to adjust downwards on a market review — unless the lease specifically permits it. If the market has softened, the landlord’s valuer and the lease structure will determine whether the tenant can capture that reduction.
Ratchet clause
A ratchet clause provides that rent cannot fall below the level set at the last review, regardless of what a market review finds. A hard ratchet means rent can only move upward — ever. A soft ratchet may allow for downward movement in limited circumstances.
Ratchet clauses became controversial after the 2012 ADLS Sixth Edition deliberately omitted a mandatory ratchet from the standard form, reflecting the market’s shift toward fairer rent review outcomes. Ratchets still appear in some older leases and in individually negotiated agreements — review them carefully before signing.
Tenant Responsibilities
Fit-out
The process of making alterations or improvements to the premises to suit the tenant’s specific use. Fit-out works almost always require the landlord’s written consent under the ADLS Sixth Edition. Landlords typically impose conditions — a bond, approval of plans, requirement to use licensed contractors, and reinstatement obligations.
Who pays? The tenant, usually. A landlord may contribute a “fit-out contribution” or “incentive” as part of lease negotiations in competitive markets, but this is always a negotiated term, not a standard entitlement.
Make-good
The obligation to return the premises to their original condition (or a defined condition) at the end of the lease. Under the ADLS Sixth Edition, the standard make-good obligation requires the tenant to remove all fixtures and fit-out and restore the premises — except for fair wear and tear.
Make-good costs can be substantial: removing a commercial kitchen, reinstating partitioning, repainting, replacing floor coverings. It is worth negotiating the make-good scope up front and, if possible, including a “landlord may elect to retain fit-out” clause so that a well-done fit-out can be left in place rather than stripped out.
Subletting and assignment
Under the ADLS Sixth Edition, a tenant generally cannot sublet or assign the lease without the landlord’s prior written consent. The landlord cannot unreasonably withhold consent for an assignment to a creditworthy assignee who will carry on the same permitted use.
If your business might be sold, restructured, or relocated during the lease term, understand the assignment provisions before you sign — they may be more restrictive than the standard form.
A Practical Checklist for Reviewing a Commercial Lease
Key terms to check before signing
0/0 completeThis article is general information about commercial leasing terms under New Zealand law as at May 2026. It is not legal advice. Get advice on your specific situation.
Sources
- Property Law Act 2007Governs commercial lease rights and obligations in New Zealand
- ADLS/REINZ Deed of Lease (Sixth Edition 2012)Standard form commercial lease used across New Zealand
Get in touch with NZ Legal if you need help reviewing or negotiating a commercial lease.
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