No access clause implied in commercial leases

On 28 October 2021, the Government amended the Property Law Act to imply a ‘no access in an emergency clause’ into commercial leases which do not already provide for adjusted rent payment terms during an epidemic emergency. The implied clause applies from 18 August 2021, which was the start of the most recent rise in Alert Levels, but will not affect agreements between landlords and tenants to adjust rent obligations made prior to that date.
Author(s): Virginia Bonanni
A close-up of a silver house key inserted into a round, silver door lock, symbolizing the absence of an "access clause" often implied in commercial leases. The key has a key ring attached, holding several smaller metal rings that reflect light against a plain, dark background.

Businesses without ‘no access’ clauses have been liable to pay full rent throughout the COVID-19 pandemic, although many landlords and tenants have negotiated rent reductions even without a ‘no access’ clause. 

The no access clause allows the lease parties to agree on a ‘fair proportion’ of rent and outgoings that should be reduced during an emergency if the tenant cannot access the property to conduct their business fully. 

The assessment of what is a fair proportion of rent is subject to agreement between the landlord and tenant. They are to consider any loss of income experienced by the tenant during the period they are unable to access the premises due to lockdowns or because of reasons of health or safety related to the epidemic. 

The changes also require the parties to take all reasonable steps to respond to a communication from the other party about the operation of the no access clause, with any disputes being referred to arbitration under the Arbitration Act. Non-binding mediation and other dispute resolution alternatives such as expert determination may also be used to resolve the dispute. 

The New Zealand Dispute Resolution Centre is offering a speedy low-cost fixed fee arbitration and mediation service for parties in such disputes where they have been unable to agree an appropriate level of rent reduction. More information on these and our other dispute resolution services are available here. 

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If you found this article helpful and are interested in learning more, there is a wealth of other resources available on our website. We have a wide array of articles and guides on a variety of topics, each designed to provide you with a deeper understanding of the subject matter. We encourage you to explore these resources and deepen your knowledge.

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