By: Jeff Kenny
Published: 15/11/2012
To read this article as a pdf please click here.

The Canterbury Earthquakes have been a major catalyst for the revision of the widely used ADLS Lease form.  As of 5 November 2012 the new version (the sixth edition 2012) is available for use replacing the fifth edition 2008.  Also updated and now available are the Deed of Assignment of Lease, Deed of Sublease, Agreement to Lease and Agreement to Assign Lease.

Unfortunately the latest version of the ADLS Lease falls well short of what is required, both from a Landlord's and a Tenant's point of view.

For example, it fails to deal with the uncertainty around when premises will be so badly damaged that the lease should end. The Lease still uses the idea that the premises must be "untenantable" In real world situations this is unclear.

The Lease attempts to deal with what happens if premises are inaccessible. Unfortunately it fails to deal with this properly. For instance, the inaccessibility provisions only apply if the premises are undamaged. This will cause real problems with the Landlord's loss of rents insurance as this will be triggered by actual damage. A sharing of risk between Landlord and Tenant in that situation is much more appropriate. It is also very odd that a Tenant can cancel the Lease after a specified period of time if the premises are undamaged but inaccessible but cannot do so if the premises are damaged.

The Lease also assumes the Landlord will actually be able to get insurance. As we have seen in Canterbury that assumption could easily be wrong – especially for certain types of buildings. What happens if the Landlord cannot get insurance despite making their best efforts to do so? It would be far better to spell out the consequences of that and share the risk of that happening.

Some changes to the Lease are undoubtedly helpful, but a majority of them are Tenant friendly. So Landlords need to be particularly weary of it. But because of the continuing problems with the form of Lease, and because some of the new changes are not suitable, Landlords and Tenants should check with their legal adviser before entering into a Lease in the new form.



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