What happens if you don’t sign a Lease?

A business owner moved into commercial premises in Wellington and began paying weekly rent.  The landlord had mentioned getting a lease agreement in place but did not provide one before the business owner moved in.  The business owner asked the landlord about the lease agreement a few times, but each time was told it would be coming soon.  After a few months she gave up asking and carried on paying rent.

About six months after the business owner moved in, the landlord called and said he had decided to sell the property so she had to move out.  He told her that since there was no lease agreement in place she would have to move out immediately.  Somewhat shocked by this news the business owner rang her legal advisor very distressed to ask whether she really had to move out immediately.

Fortunately for the business owner, the answer is “No”.  The law provides that where a person who is leasing a property has taken possession of that property (in other words they have moved in, started paying rent, and are enjoying the property as if they were leasing it) there is an implied lease in place.  This is the case even if they have not agreed on the duration of the lease with the landlord.

An implied lease can be terminated by either party at will, but they must give the other party at least 20 working days’ notice of their intention to terminate.

In the business owner’s case, she was able to tell the landlord that she was happy to vacate the premises but would take the benefit of the permitted 20 working days to make arrangements for moving out.