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6 Key Changes to Commercial Leasing Landlords and Tenants Need to Know About

The Property Law Act made big changes to property Law from 1 January 2008, that people dealing with property transactions need to know about.

Here are six of the key changes dealing with Commercial Leases.

  1. The Act removes a Landlord’s right to take possession of a Tenant’s belongings and sell them for unpaid rent.  This rather dubious right had previously existed for centuries.
  2. Under the previous law leases of less than three years duration did not have to be in writing to be enforceable.  The new Act makes it clear that only newly defined “short term leases” do not need to be in writing.  A “short term lease” is defined as being for a term of one year or less, and starting no later than twenty working days after the agreement to lease is made.
  3. The previous law left it open for contracts about land (including leases and agreements to lease) being signed by a person other than the actual parties to the contract (e.g. an authorised employee of a company could sign on behalf of the company).  Under the Act the contract or document must be signed by the contracting party.
  4. The previous law provided that where a Landlord’s consent was required by the Tenant (e.g. if the Tenant wished to transfer the lease to a third party) the Landlord was required to not withhold consent unreasonably.  For the first time the new Act provides for damages to be recovered from the Landlord if it is found that the Landlord has withheld consent unreasonably.
  5. The law also provides that if a Tenant transfers (assigns) a lease to another party the original Tenant continues to remain liable to the Landlord.  So, if the new Tenant stops paying the rent the Landlord is able to require the original Tenant to pay the outstanding rent.  The new Act now makes it clear that if the Landlord and the new Tenant had agreed to change the terms of the lease (e.g. increase the term of the lease) then the original Tenant will not be liable beyond the provisions of the original lease. It is now even more important for all parties in this situation that the assignment (transfer) and any changes to the lease are recorded in writing.
  6. The previous law allowed a Landlord to cancel a lease for non-payment of rent, without notice to the Tenant, if the rent had been in arrears for fourteen days or more.  The new Act now requires the Landlord to give a Tenant notice of an intention to cancel for non-payment before the Landlord is entitled to cancel.  The Tenant must be given at least 10 working days to pay the rent before the Landlord cancels the lease.

These changes are important and will have an impact on Landlords and Tenants from 1 January 2008.  Most of the provisions in the new Act (including all of those noted above) apply to practically all leases whether they were entered before or after 1 January 2008.