Commercial Leasing in New Zealand: The Complete Guide

A commercial lease is the contract your business lives or dies by. The rent is rarely the dangerous number. It is the make-good clause that quietly costs fifty thousand on exit, the rent review mechanism that ratchets up every three years, the assignment clause that traps you in premises you have already left, and the personal guarantee that follows the directors home long after the company has wound down. Get any of those wrong at the start and you will pay for them, in cash, for years.

Commercial leasing is one of NZ Legal’s core practice areas. We draft, review, negotiate, renew, assign, surrender, and litigate commercial leases for landlords and tenants right across New Zealand, from corner-shop retail tenancies to multi-floor office leases. This page is the entry point to everything we have written on the subject. The articles below cover the negotiation levers, the rent review mechanics, the make-good traps, the assignment process, and the personal guarantee questions that almost every director eventually asks. The services panel further down covers the work we do day to day.

The five things every tenant should look at before signing

Most tenants sign the lease the agent puts in front of them with very little change. The lease drafters know this, and the form reflects it. The five clauses that matter most, and that almost always reward a closer look, are:

1. The personal guarantee. Almost every commercial lease asks the directors to guarantee the company’s obligations. Cap the dollar amount, limit it to the initial term, ask for several rather than joint-and-several liability, and build in a release on assignment.
2. The rent review mechanism. Fixed increases, CPI, market review, or a hybrid. The right mechanism depends on the asset class, the term, and the tenant’s industry. A six-yearly market review with a one-way ratchet is the default. It is not the only option.
3. The make-good clause. What state must the premises be returned in. The standard ADLS clause is reasonable. Bespoke clauses often are not. On a long lease the make-good cost can match a year of rent.
4. The assignment and subletting clause. Can you walk the lease across to a new tenant if you sell the business or close down. Standard ADLS gives the landlord wider grounds for refusal than most tenants realise.
5. The renewal and option terms. When you must serve notice to renew, what happens to the rent at that point, and what happens if you miss the window. Renewal options that look generous on paper often have notice traps inside them.

These are the items that move the long-term economics of the deal. Negotiating them once at the start costs a few hours of legal time. Living with the wrong version costs years of trading.

What landlords care about and why

Landlords are not negotiating the lease for fun. The ADLS form, and the bespoke amendments most landlords add to it, are built around two anxieties: tenant default and re-letting risk. A landlord who lets premises to a thinly-capitalised SME knows that limited liability cuts both ways. If the business fails, the landlord can be left with months of unpaid rent, an empty premises, and a make-good claim against a company with no assets to collect against.

That is why the personal guarantee, the rent review ratchet, the broad assignment veto, and the make-good obligations look the way they do. They are not arbitrary. They are the landlord’s protection against the most expensive outcomes. Understanding the landlord’s reasoning is the fastest way to negotiate the lease down. A capped guarantee with a release on assignment to a creditworthy incoming tenant gives the landlord most of what they want while protecting the tenant from the long-tail exposure. A market rent review with a properly-defined valuer mechanism gives the landlord a fair rent reset while protecting the tenant from arbitrary increases.

The anatomy of a New Zealand commercial lease

Almost every lease we see is built on the same skeleton. The deed itself, usually the ADLS Sixth Edition, runs to about thirty pages and covers the standard rights and obligations. Bolted on to the front are the schedules, which is where the deal-specific numbers and terms sit: the premises description, the term and renewal rights, the rent and rent review dates, the outgoings, the permitted use, and the personal guarantee schedule. After the schedules come the special conditions, drafted to the deal at hand, where the negotiated variations to the standard form live.

The guarantor schedule deserves its own paragraph. It is short, often a single page, and easy to skim past at the signing meeting. Read it carefully. It is the document that converts a clean limited-liability arrangement into a personal financial exposure for the directors. The standard ADLS guarantee covers far more than rent: outgoings, rates, insurance, body corporate levies, dilapidations, the landlord’s legal costs, and GST on all of the above, jointly and severally between guarantors. None of those terms are mandatory. All of them are open to negotiation.

When to involve a lawyer

The honest answer is: before you sign anything. The most expensive leases we see are the ones a director signed at the kitchen table because the agent said the deadline was tight. There is always time for a same-day review. A fixed-fee lease review is a tiny fraction of the cost of a clause that goes wrong over a six-year term, and most issues are caught in the first thirty minutes of reading the document.

If you are a tenant, send us the draft as soon as the agent or landlord puts it in front of you. We will reply with a plain-English summary of what you are signing, the clauses worth pushing back on, and the items that are reasonable to leave alone. If you are a landlord, send us the brief and we will draft the lease on the ADLS Sixth Edition with the special conditions your premises and your tenant call for. Either way, the work happens fast and the numbers are quoted up front.

Where to from here

Use the articles below to dig into the individual clauses, the services panel to see the work we do, and the contact form at the bottom of the page to send us your draft lease or a description of the matter. We respond with a fixed fee and an estimated turnaround inside two business hours. If your matter is urgent, say so in the message and we will move first.