Matter value

$8.4m total rent over six-year renewal term

A long-term Auckland CBD tenant was negotiating a six-year renewal with a contested rent review. We worked through the lease provisions, the comparables, and the contractual mechanics to land a renewal the client could live with.

The challenge

The client, a 25-person professional services firm in the Auckland CBD, was approaching the end of their initial six-year lease term in a Queen Street tower. The lease included a right of renewal for a further six years subject to a market rent review. <!-- ADAM: confirm the term length. --> The landlord proposed a new rent of $1,420 per square metre, up from the existing $1,050. The client believed the market figure was closer to $1,150 to $1,200 based on three comparable buildings within two blocks. <!-- ADAM: confirm the actual rent figures. -->

The lease was a 2012 ADLS deed of lease with the standard rent review clause requiring "current market rent" to be agreed or determined by an arbitrator. <!-- ADAM: confirm the form year and the wording. --> The landlord's agent had attached a market evidence pack that leaned heavily on a single comparable building two streets up that we did not consider properly comparable due to a recent floor refurbishment.

The client wanted to renew but not at the proposed figure. They also did not want to take the matter to arbitration if it could reasonably be avoided, given the cost and the relationship implications.

What we did

We reviewed the rent review clause line by line, including the assumption and disregard provisions. The landlord's evidence pack was assuming a fitted-out floor on the renewal, which the lease specifically required to be disregarded. That single point shifted the comparables materially.

We commissioned an independent market rent assessment from a registered valuer who specialised in CBD office. The valuer's report came back at $1,180 per square metre. We submitted the report alongside our written response to the landlord's agent, walking through the lease assumptions and the comparables we considered properly aligned.

The landlord came back at $1,310. We countered at $1,200 with three pages of contractual reasoning attached. The landlord's agent escalated to the building owner directly. We held a roundtable meeting in the building's foyer level boardroom with the agent, the landlord, our partner, and the client's COO.

By the end of the meeting we had a deal at $1,225 per square metre, a three-month rent abatement to cover refresh costs of the existing fit-out, and the right of renewal preserved on the same terms for the following term.

The outcome

The renewal completed on the agreed terms. <!-- ADAM: confirm whether the renewal has actually been executed yet. --> Across the six-year renewal period, the difference between the landlord's opening position ($1,420) and the agreed rate ($1,225) saved the client approximately $585,000 in rent, plus the value of the abatement.

The client stayed in the building they had occupied for six years, kept their existing fit-out, and avoided a 12 month arbitration process.

Key takeaway

Market rent reviews are won and lost on the contractual assumptions, not on the headline comparables. The landlord's agent will often present a comparables pack that ignores the disregards and assumptions in the lease itself. The tenant's lawyer's job is to read the lease properly, frame the comparable evidence to match, and use the contractual mechanics to push the discussion onto fair ground. Most renewals do not need arbitration when this work is done up front.

Context

We act for tenants and landlords on commercial leasing. The negotiating posture differs but the legal craft is the same: read the lease, understand the assumptions, and apply the comparables accordingly.

If you have a renewal coming up in the next 12 months, the time to start work is now. The longer the runway, the better the negotiating position.