Business on hold? Your lease may help

The Warkworth and Mahurangi region continues to grow in popularity, and that growth brings with it opportunity for local businesses. By its nature though, development also means change that can impact on your business. As a local business owner, you pour your heart and soul into your enterprise, but what happens when unforeseen events disrupt your operations? Natural disasters, major public works, or even simple access issues can throw a wrench into your plans. That’s where your commercial lease becomes crucial.

Commercial leases often follow standardised formats, typically the “ADLS” version, but the specific details can vary significantly and there are many different types of non-ADLS lease documentation. The exact provisions of your lease can have a major impact on your business during unexpected disruptions. While most business owners focus on rent and term, the fine print regarding business interruption can be a lifeline during challenging times.

Your lease guarantees “quiet enjoyment”, which means you should have uninterrupted access to your premises. However, this isn’t absolute. If external factors such as road closures due to council work impede access, the lease might not offer complete protection. Carefully review clauses related to access. Does the lease address temporary disruptions? Does it outline the landlord’s obligations in such scenarios?

Natural disasters like floods or earthquakes can severely damage premises. The ADLS lease typically addresses this through clauses dealing with damage and destruction. These clauses often outline procedures for determining the extent of damage, the landlord’s obligation to repair, rent abatement or suspension during repairs, and termination rights if the premises are deemed unusable. It is very important to understand if the lease covers partial or total destruction.

Even during business interruption, you might still be liable for outgoings such as rates, and insurance.

Understand your insurance obligations and ensure your policy covers business interruption. Landlords will also have their own insurance. The interaction between your insurance and the landlord’s insurance is important to understand.

While not always explicitly included in standard ADLS leases, a “force majeure” clause can excuse parties from fulfilling obligations due to unforeseeable circumstances beyond their control. If your lease includes this, it could be relevant during major events. However, the scope of force majeure is often debated, so legal advice is essential.

Business interruption is a reality. Protect your business by first reviewing and understanding your lease to understand your rights and obligations. Communicating with your landlord, ensuring you have adequate insurance, and seeking legal advice when needed can all help keep your business moving.

Proactive steps now can mitigate future disruptions.