Signing a commercial lease is one of the most significant financial commitments a business owner will make — often second only to purchasing the business itself. Yet many Auckland business owners sign leases without fully understanding the terms or negotiating the clauses that matter most. A commercial lease is very different from a residential tenancy, and the consequences of getting it wrong can be costly.

The ADLS Deed of Lease

Most commercial leases in New Zealand are based on the Auckland District Law Society (ADLS) form of Deed of Lease. While this is a standardised document, landlords routinely modify it through additional clauses and schedules that can significantly change the tenant's obligations. Never assume that a "standard" lease is tenant-friendly — it almost always favours the landlord.

Key Clauses to Scrutinise

Rent and Rent Reviews

Understand not just the starting rent, but how and when it will be reviewed. Common rent review mechanisms include:

  • Market rent reviews — The rent is adjusted to the current market rate, determined by a registered valuer if the parties cannot agree. This can result in significant increases.
  • CPI reviews — The rent is adjusted in line with the Consumer Price Index. These are more predictable but can still compound over a long lease term.
  • Fixed increases — The rent increases by a specified percentage at set intervals. Check whether the increase is reasonable and sustainable for your business.
  • Ratchet clauses — Some leases include "ratchet" provisions that prevent the rent from being reduced below the current level at a market review. These are particularly unfavourable for tenants.

Outgoings and Operating Expenses

In addition to rent, tenants are typically required to pay a share of the building's operating expenses (outgoings). These can include rates, insurance, body corporate levies, maintenance, and management fees. Make sure you understand:

  • Exactly which outgoings you are responsible for
  • Whether there is a cap or budget on outgoings
  • Whether capital expenditure items are included (they should not be, as these are the landlord's responsibility)

Maintenance and Repairs

Under the standard ADLS lease, the tenant is responsible for maintaining the premises in good order and condition (fair wear and tear excepted). However, landlords often insert additional clauses requiring tenants to maintain specific items — such as air conditioning units, grease traps, or specific flooring — at their own cost. Understand your maintenance obligations before you sign.

Make Good and Reinstatement

At the end of the lease, the tenant is usually required to "make good" the premises — returning them to the condition they were in at the start of the lease (or some other agreed standard). This can involve removing fitout, repainting, replacing carpet, and repairing any damage. Make good costs can run into tens of thousands of dollars, so factor this into your business planning.

Assignment and Subletting

If you want to sell your business, you will likely need to assign the lease to the purchaser. Most leases require the landlord's consent to assign, and the landlord may impose conditions — including requiring the outgoing tenant to guarantee the incoming tenant's obligations. Check the assignment provisions carefully, as restrictive clauses can make it harder to sell your business.

Renewal Rights

A right of renewal gives you the option to extend the lease for a further term at the end of the current term. This is valuable because it gives you security of tenure. If your lease does not include a right of renewal, you could be forced to vacate the premises at the end of the term — even if your business is thriving.

Personal Guarantees

If you are leasing through a company, the landlord will almost always require a personal guarantee from the directors. This means that if the company cannot pay the rent, the guarantor is personally liable. Understand the extent of any personal guarantee before signing, and negotiate limitations where possible.

How Indus Legal Can Help

Our commercial team reviews and negotiates commercial leases for tenants across Auckland — from small retail premises in Botany and Pakuranga to larger commercial spaces in East Tamaki and Manukau. We identify the clauses that matter, explain the risks in plain language, and negotiate better terms on your behalf. If you are about to sign a commercial lease, or if you are dealing with a lease dispute, contact us before you commit.

Call us on 09 869 4888 or email office@induslegal.co.nz.