July 23, 2019
We recommend our commercial clients first negotiate lease terms with the landlord and then recorded those terms in a formal Agreement to Lease. It is important to remember an oral agreement to lease is not enforceable until a contract has been signed by both parties.
The Agreement to Lease allows the landlord and tenant to establish the essential terms, such as duration of the lease and amount of the rental. Then later they can (and should) complete a full Deed of Lease for the premises which includes a comprehensive list of terms.
AGREEMENT TO LEASE
Agreements to Lease are generally short documents which are used to establish the basic terms of the lease. The terms will include details like the address and description of the premises, car parks, monthly rental, commencement date, rights of renewal and an indication of who is responsible for outgoings. If required, the document can record any other terms or conditions which will need to be confirmed later and which should then be recorded in the full Deed Lease. An Agreement to Lease will usually specify that the landlord and tenant must complete a Deed of Lease prior to the tenant taking possession of the premises.
DEED OF LEASE
A full Deed of Lease is a more comprehensive document than the Agreement to Lease. It provides details of the landlord and tenant's obligations during the term of the lease. For example, the tenant is requ
ired to pay for rates and other outgoings while the landlord must provide the tenant with quiet enjoyment and maintenance of the landlord's fixtures and fittings.
Is it 0k to only sign an Agreement to Lease?
The landlord and tenant should always complete a full Deed of Lease. But in the event that a full Deed of Lease is not signed after completing an Agreement to Lease (and assuming the parties are using Auckland District Law Society's standard form) the parties can reply on a clause in the Agreement to Lease which specifies the covenants and provisions of the on a clause in the Agreement to Lease which specifies the covenants and provisions of the then current Auckland District Law Society published form of Deed of Lease will bind the landlord and tenant regardless of whether or not they have actually signed a full Deed of Lease.