Leasing or subleasing commercial premises is a common and important issue for businesses in Wanaka, Central Otago and throughout New Zealand. Whether you are a landlord granting a lease, a business taking on new premises, or a tenant looking to sublease part of your space, it is important to understand your rights and obligations before signing.
Commercial leases can create significant long-term legal and financial commitments. Even where parties use a standard form document, the detail matters. Well-drafted lease documentation can help avoid disputes, reduce risk and give both parties greater certainty.
Key terms in a commercial lease
In New Zealand, many commercial leases are based on standard form documents published by The Law Association. Those forms provide a useful starting point, but they still need to be completed carefully and tailored to the particular arrangement.
A commercial lease will usually deal with matters such as:
- the term of the lease and any rights of renewal
- the amount of rent and how it may be reviewed
- outgoings and operating expenses, including the proportion payable by the tenant where the premises has multiple tenancies
- permitted use of the premises
- maintenance and repair obligations
- assignment and subleasing rights
- default provisions and termination rights
These provisions can have significant consequences if they are not properly understood at the outset.
Personal guarantees and lease security
Landlords will often require security from a new tenant, such as a rent bond, bank guarantee or personal guarantee. These arrangements are intended to protect the landlord if the tenant defaults under the lease.
That protection may extend to rent arrears, default interest, reinstatement costs, legal fees and other losses suffered by the landlord. Tenants should understand the circumstances in which a landlord may call on a rent bond or bank guarantee, and guarantors should be clear about the extent of their personal exposure.
Guarantors should be aware that a landlord may pursue them directly if the tenant defaults, without first taking action against the tenant.
A further issue can arise when a tenant sells a business and assigns the lease to a new owner. Unless the landlord agrees otherwise, the outgoing tenant’s personal guarantee may remain in place for the balance of the lease term despite the assignment. An outgoing tenant should therefore consider negotiating a release from the guarantee or, at the very least, ensure the incoming tenant is financially sound.
What to know before agreeing to a sublease
A sublease arises where an existing tenant grants rights over all or part of the leased premises to another party. Importantly, the original tenant remains liable to the landlord under the head lease. That means if the subtenant defaults, the head tenant will still be responsible to the landlord.
Subleasing may be considered where:
- a business no longer requires the full premises
- a tenant wants to reduce overhead costs
- a tenant relocates before the lease expires but cannot bring the lease to an end
In many cases, the landlord’s written consent will be required before a sublease can be granted. Under common ADLS or TLA lease forms, that consent may not be unreasonably withheld, but the landlord is generally entitled to review the proposed subtenant and the terms of the proposed sublease.
A sublease should not grant rights that exceed those contained in the head lease. Care also needs to be taken to ensure the term, rent review provisions and any renewal rights under the sublease operate consistently with the head lease. This is one of the key reasons legal advice should be obtained before entering into a sublease.
Agreement to Lease vs Deed of Lease
A common issue in leasing matters is misunderstanding the difference between an Agreement to Lease and a Deed of Lease.
The Agreement to Lease is typically entered into first. It may be conditional and may deal with matters such as fit-out, possession dates or works to be completed before commencement. Once the agreement becomes unconditional, and before the lease starts, the parties should then enter into the Deed of Lease, which records the ongoing legal rights and obligations of the parties.
The same distinction applies in subleasing arrangements. An Agreement to Sublease is not the same thing as a Deed of Sublease, and each document serves a different purpose.
Why legal review matters
Although standard lease templates are widely used in New Zealand, they are often misunderstood, completed incorrectly or signed improperly. Problems in lease documentation can have significant financial consequences, particularly when parties later discover they have assumed obligations they did not expect.
For landlords, a poorly prepared lease can affect enforceability, security and the value of the property. For tenants, it can result in unexpected exposure, restrictions on use, or costly disputes down the track.
For businesses in Wanaka and Central Otago, leasing arrangements are often closely tied to growth, relocation, succession planning and investment decisions. Getting the lease documentation right at the outset can avoid expensive issues later and protect the long-term value of the business or property.
Final thoughts
Leasing and subleasing commercial premises involves more than filling in and signing a standard form agreement. These arrangements create binding legal obligations that may last for many years and involve substantial financial commitments.
Whether you are entering into a new lease, considering a sublease, approaching a renewal, or dealing with a rent review, legal advice at the outset can help ensure the documentation reflects the commercial agreement reached and is properly executed.
Well-drafted lease documentation is an asset. It provides clarity during the life of the lease and can also make a real difference if the business or property is later sold.
By Paige Devereux, Associate – Commercial Property and Business Law, Checketts McKay Law, Wanaka
March 2026