Negotiating Leases after the GFC - Mt Hobson Group

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Negotiating Leases after the GFC

By Mt Hobson Group

05/15/2012 With the residential property market moving again, new trends are developing with commercial leases. These reflect new common practices, a change in the law, and a result of lessons learned from Canterbury. Recent changes commonly made to the standard law society lease form include: · CPI or Market Rent - Using CPI annually, or every second year, to increase the annual rental. Often overlooked is the need for regular market rental increases where the market gets ahead of inflation. A 2 year CPI increase, and a 5 year market review are now becoming commonplace. · Ratchet clause – The current lease allows a rental to reduce but by no less than the rental when the lease started. This is often changed to make sure that the rental can never reduce from the last rent review. Prior to the GFC this was thought to be theoretical, but experience since then shows rents can go down. · Gifting – A personal guarantee was the holy grail of landlords. With no limits on gifting the new trend is for a bond, bank guarantee, or a guarantee from a trust. A personal guarantee is still valuable as bankruptcy is a last resort for tenants. · Insurance – The standard form lease limits any insurance excess to $500. Since the Christchurch earthquake is common to remove the cap on the excess payable by the tenant. · Access for Work – Another post-earthquake trend is the need for a landlord to have access to the building for repairs for future earthquake strengthening requirements. · Unit Titles Act – Body Corporate properties now need to have a long term maintenance plan. A landlord needs to make sure that a tenant has to contribute towards these new costs. The commercial property market has not yet regained the strength it once had. Inducements remain common to attract new tenants, including rent holidays. It is possible to structure a lease looking forward 5 to 10 years, while still giving lease inducements today.

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Mt Hobson Group

Mt Hobson Group

Dealing with Local Government for Resource Consents in Auckland and around New Zealand can be confusing, time consuming and costly.A skilled Town Planning Consultant can save you both time and money in the resource consent process. As Planning Consultants we take the hassle out of obtaining Resource…

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