Jim was looking for new premises for his small consultancy business. Eventually, he signed what he thought was a fantastic deal to lease part of an office space from Big Consulting Firm, which would continue to use the rest of the space. The space is in a prime location close to Jim’s clients, and Jim really thought he had hit the jackpot.

Because Jim only needed to use his office space for a few days each week, he and Big Consulting Firm agreed that he would only use the space on these particular days during business hours. They also agreed that Big Consulting Firm could enter Jim’s office space at any time to access some of its files that were stored there. Jim signed a document that was headed “Lease” with Big Consulting Firm to record their agreement.

When Big Consulting Firm one day sold up to Great Consulting Ltd, Jim was not concerned because he understood that his lease would continue. He was shocked when one day, in the middle of a busy meeting, he received a trespass notice from Great Consulting Ltd. Not only was this extremely embarrassing for Jim, but it meant that he had to pull up stumps and leave his prime premises. Jim’s clients loved the fact that he was close to them, and he now worries about the effect that the upheaval will have on his business profile and his relationship with his clients.

What Jim did not realise was that even though the document he had signed with Big Consulting Firm was called a lease, in reality it was only a licence to occupy. This was because he did not have the exclusive right to occupy his part of the premises. Therefore, when Big Consulting Firm sold the premises, Jim’s right to occupy his office space came to an end.

Jim’s unfortunate situation highlights the need for commercial tenants to get good advice before they enter into arrangements with landlords. If you are in this situation, or would like to get advice about an existing lease or licence, contact Claire Tyler on ctyler@raineycollins.co.nz or 04 473 6850.