Agreement to Lease
An Agreement to Lease is the initial document signed between the parties setting out the main terms of agreement between them. It is not the formal lease document. The Agreement to Lease usually requires a formal deed of lease be entered into setting out all of the terms, rights and obligations of the parties and enforcement provisions. Many clients mistakenly believe that once they have signed the Agreement to Lease, this is the formal contract. The Agreement to Lease does not contain all of the necessary provisions required to protect both parties which are contained in the full deed.
Recent revisions of the Auckland District Law Society (ADLS) commercial lease removed the ability for a Landlord to charge the Tenant for the Landlord’s legal costs for preparation of the lease documents. Each party now bears their own costs for the preparation, variation or deed recording a rent review or renewal unlike the earlier versions which made this a Tenant responsibility. The Tenant is still required to meet the Landlord’s reasonable costs in considering any request by the Tenant for the Landlord’s consent as well as the enforcement of the Landlord’s rights, remedies and powers.
Generally speaking a Tenant is responsible for maintaining the interior of the premises and is required to yield up the premises in a like condition as at the start of the lease. The Landlord is usually responsible for maintaining the exterior of the building and ensuring that it is weathertight. Often having a premises condition report attached to a lease when signed will avoid any possible disputes at the end of the lease. This report is very useful in situations where a Landlord has sold the premises, or the Tenant has sold the business and assigned the lease to a new Tenant.
Renewal of Lease
Often we see both the Landlord and Tenant fail to deal with subsequent renewals of the lease according to the lease terms. The standard provisions of the ADLS lease provides that where the Tenant intends to exercise its right of renewal (if one is provided) it must provide written notice to the Landlord of its intention to exercise its renewal no later than three months prior to the expiry of the current term. If a Tenant fails to provide that notice, the Landlord can terminate the lease on the final expiry date. However, if neither party take any steps the lease will revert to a month to month lease until either party terminates with one month’s notice.
Dealing with renewals correctly is important from both parties’ perspective. For the Landlord it ensures that a Tenant is locked in for a specified period of time and provides it certainty of future rental income.
From a Tenant’s perspective it provides security of site which is especially important where the location of the premises is a fundamental part of its goodwill. If a Tenant fails to properly execute or exercise its rights of renewal the value of its business could be drastically reduced.
Commercial leases can be complicated and both Landlord and Tenant are considered equal commercial parties. It is therefore important that both parties understand their obligations.
If you would like some specific advice in relation to your lease or a particular situation we suggest that you contact us and we can provide you with some further advice in this regard.
Michael is an Associate in our Property Team based in our Kaiapoi Office and can be reached on (03) 327 8159 or by email firstname.lastname@example.org
Christmas Hours 2017/2018
We close for our Christmas break at 4.00pm, Friday 22 December 2017 and will reopen on Monday, 8 January 2018. We wish you a merry Christmas and a happy New Year. 125 years!!!
Helen is based on our Kaiapoi office and her areas of expertise include property conveyancing, estates and wills. Helen has seen a number of changes will over her time with the firm both in terms of the partnership as well as in her area of legal practice. We congratulate Helen on her anniversary and thank her for all her commitment and years of excellent service.
You may already have seen our 125 years symbol on our email, letters and some of our publicity. We haven't all been alive that long, but we can trace our roots back to 1892 in Kaiapoi so we're celebrating 125 years throughout this financial year.
The age of our firm does not mean we are old-fashioned and stuffy. What it does mean is that we can provide you with some comfort in knowing that, having been around that long, we are still likely to be here when you need us.
We've developed relationships with our clients and their families over a long period of time and between us all we have plenty of years of experience dealing with issues just like yours so we are well placed to help you with whatever legal assistance you need.
We are celebrating with our staff, old and new, as well as our clients later this year.
If you want to read our full history, here's the link.
Ronald McDonald House
“Hundreds of families from all over the South Island and lower North Island stay with us completely free of charge every year so they can concentrate on what matters most – helping their children heal.” (from Ronald McDonald House South Island)
Here at Corcoran French, we want to help people in other ways to our legal work. The Ronald McDonald House located in Christchurch is part of that and a great local charity that we support.
Our team prepares meals as part of the House’s family dinner programme, we collect for the charity’s appeal days and we are proud to sponsor a room at the House. The room sponsorship in particular means families have their “home away from home” while their children receive hospital treatment in Christchurch. Our monthly Casual Fridays are also used as a fundraising opportunity, and some of our staff contribute to the charity directly out of their pay. Our Partners also financially contribute to the House.
If you’d like to know more, ask one of our team when you’re next talking to them, or visit www.rmhsi.org.nz
Taxation Changes for Your Residential Property
If you or your family trust plan to purchase, sell or transfer a residential property on or after 1 October 2015 then you need to be aware of the new “Bright Line Test” for the taxation of residential property transactions.
In brief, gains from the sale of residential property purchased after 1 October 2015 (except for the main home of the seller) and where the property has been held for less than two years will be taxable. The gain is simply the difference between the purchase price and the sale price, after taking into account legal fees, real estate fees and capital improvements. The capital gain is treated as ordinary income and taxed at the seller’s marginal rate.
As is already the case, gains made on the sale of a property held for more than two years will be subject to income tax if the property was acquired with the “intention” of on-selling it for gain.
Sellers will not be taxed on gains if the property is their main home (this exemption does not apply if the seller is an “offshore person”, is acting as a trustee or has used this exemption at least twice in the preceding two years). A few other very limited taxation exemptions to the “Bright Line Test” apply.
The seller decides if the property is the main home but knowingly providing false or misleading tax information is an offence and can result in a fine, if convicted, of up to $25,000 for a first offence or $50,000 for a repeat offence.
Tax information will be captured by way of a signed “tax statement” at the time of registration when a property is bought, sold or transferred. The general rule is that property buyers/sellers must provide their IRD number and other details (unless a reporting exemption applies). Additional requirements apply to “offshore persons”. This information is passed on to Inland Revenue.
Some practical implications of these taxation changes are:
• Increased compliance in terms of cost and time;
• A number of passive trusts without an IRD number will now need one – obtaining an IRD number takes time;
• Increased likelihood for late settlements and default interest;
• Nominations can no longer be last minute due to tax information requirements.
This update is only a high level summary of the taxation changes for residential property transactions. We would encourage you to talk to us if you have any queries regarding the implications for your own personal situation. Our Commercial and Property Team would be happy to assist.
Delys Brough is a Solicitor in our Commercial and Property Team. She can be contacted on email@example.com or (03) 379 4660
Health and Safety at Work
The Health and Safety Reform Bill has been passed by Parliament and it will come into effect on 4 April 2016. The new law will be called the Health and Safety at Work Act and will be accompanied by a series of regulations to support the new Act. When the Bill was first drafted there were serious concerns about its impact on business, particularly small businesses and farms. In order to strike the right balance, the Transport and Industrial Relations Committee made some significant improvements to the new law, yet there are still fundamental changes which will impact you and your business.
The new law is intended to take a risk-based approach to health and safety by focussing on what a business needs to do, what is reasonably practicable for it to do, and what is in its control.
Stronger worker participation underlines the expectation in the Act that everyone in the workplace is responsible for workplace health and safety, and that workers are more empowered to intervene when they see an unsafe situation. The Act does this through the introduction of a "Person Conducting a Business or Undertaking" (a PCBU) who will have a primary duty to ensure the health and safety of workers, as well as any others who are affected by its work. The PBCU must identify, minimise and eliminate risks and hazards in their workplace. High risk workplaces will be subject to the strictest health and safety requirements.
The new law also proposes substantially heavier penalties for those found to be in breach of the Act. The processes that you and your business put in place now are therefore important steps to take in order to ensure that you are not caught out by these new changes.
Please contact one of our employment specialists for further information or if you wish to discuss how the new law may affect you or your business.
As most of those with a Trust will be aware, gift duty was abolished in October 2011. This means that a gifting program can now be completed in "one hit". There are issues that you must consider before gifting in one hit such as whether there are any issues with creditors, and the ability to show solvency at the time the asset is moved and gifted into the trust. In addition, the Court of Appeal has recently confirmed a Ministry of Social Development (MSD) challenge to existing gifting programmes which have been completed at the rate of $27,000.00 per individual per year. The Court found that the MSD rules and regulations allow for a gift of $27,000.00 per couple, so at a rate of $13,500.00 each per year, rather than at $27,000.00 each, which has been the previous rate of gift.
The Law Commission is recommending some changes to the Trustee Act 1956. This proposed new law will set out the core characteristics of trusts and the duties of trustees. The Law Commission has also set out to rectify the use of a trust to keep a former partner from their share of assets made during the relationship. It recommends that the Court be able to have the power to transfer the trust assets to compensate the disadvantaged party. The Law Commission has also recommended that a trust be able to exist for 150 years rather than the current 80 years.
Please contact one of our trust teams for further information or if you wish to discuss how these proposals may affect you.