Earthquake issues

Transcription

1 Earthquake issues A comparison of the and Auckland District Law Society Inc. leases in response to issues arising out of the Christchurch earthquakes Gregory Allen, Mike Scannell & Greg Towers

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3 Seismic rating Provision made for landlord to warrant seismic rating of building. No provision as to seismic rating.

4 Improvements rent Committee considered whether to reinstate improvements rent given landlords now have an obligation (under Building Act 2004) to carry out earthquake strengthening works. Decided unfair to reinstate improvements rent for this reason alone. Committee decided to delete improvements rent provision as it was feared that landlords may try to (inappropriately) pass on high building strengthening costs through this clause.

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6 Insured risks Landlord can insure on an indemnity basis if cover is prohibitively high. Landlord is not in breach if no cover is available for a particular risk (at a cost that the landlord reasonably considers to be economic). Landlord elects at outset of lease as to whether insurance is full replacement and reinstatement or indemnity basis. If the insurance monies are inadequate for repair or reinstatement, the lease terminates. If landlord effects indemnity insurance rather than replacement, tenant may terminate if landlord does not confirm it will make up shortfall in funds available for reinstatement.

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8 Total destruction

9 Total destruction If premises are destroyed or damaged so as to be untenantable or building totally destroyed, lease will terminate from the date of such destruction or damage. If premises destroyed or damaged: so as to render premises untenantable, the lease shall at once terminate; or in the reasonable opinion of the landlord so as to require demolition or reconstruction, then the landlord may within 3 months give 20 working days notice to terminate.

10 Partial destruction

11 Partial damage/destruction If in landlord's opinion: 1.repair and reinstatement is impracticable or undesirable; 2.the landlord considers it must undertake major rebuilding; 3.insurance monies are insufficient; 4.third party consents are not available Until completion of repair / reinstatement, a fair proportion of rent and outgoings shall cease to be payable. If any permit or consent unobtainable or insurance monies inadequate, term shall at once terminate. landlord may terminate within a reasonable period after the damage or destruction.

12 If premises are inaccessible

13 If premises are inaccessible Right introduced for tenant to terminate if premises are inaccessible or significantly damaged. Tenant serves a notice requesting landlord to advise as to reinstatement period. If more than 9 months, tenant may terminate. If less than 9 months, landlord must reinstate. If reinstatement not completed by end of reinstatement period, tenant may terminate provided it can demonstrate that at the date of the reinstatement notice, reinstatement was not reasonably achievable within the reinstatement period. If there is an emergency and the tenant cannot access the premises for the specified period (the default being 9 months) or it is reasonably certain that it will be unable to do so, either party may terminate the lease.

14 Rent abatement Tenant has right to rent and operating expense abatement where premises are undamaged but inaccessible. Dependent on landlord being able to claim loss of rent insurance. If not, tenant must claim on its business interruption insurance (which it is obliged to effect under the new lease provisions). If there is an emergency (an event, natural or otherwise) that causes or may cause loss of life or serious injury, illness or in any way seriously endangers the safety of the public or property) and the tenant cannot access premises to fully conduct its business, a fair proportion of rent and outgoings is abated.

15 Timeframes Committee decided following Christchurch earthquakes that best not to be too prescriptive introduced "reasonable period" for termination/reinstatement in the damage and destruction provisions. Timeframes were not prescriptive in earlier version of lease. This has not changed.

16 Earthquake strengthening works Landlord cannot require tenant to vacate premises for earthquake strengthening works (although continues to have the right to carry out works while tenant is in occupation). Landlord can require tenant to vacate whole or part to carry out works required by statute. The landlord must act in good faith and have regard to nature, extent and urgency of works. A fair proportion of rent and outgoings are abated.

17 Does your lease cover all eventualities???