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  1. #1
    Join Date
    Jun 2004
    Posts
    4,143

    Default Agreement to Lease or Deed of Lease

    Is an Agreement to Lease sufficient or do I really need the cost of a Deed of Lease?
    Situation
    renewing a previous lease for another year. The previous lease only ever had the Agreement to Lease done and has had its right of renewal. The tenant has agreed to continue the tenancy on financial terms that are acceptable. The previous Agreement had the 'tenant pay for the deed' clause struckout.

    What extra rights or protection will a Deed of Lease give that the Agreement to Lease doesn't cover?

  2. #2
    Join Date
    May 2006
    Location
    Mordor
    Posts
    947

    Default

    The Agreement is a short form designed to simply cover the essential stuff, a temporary document until a full lease is executed. Yes you can continue under the Agreement. The risk is that the landlords powers and rights are much more extensively set out in the standard Deed Of Lease and you don;t have these in the Agreement.

    Its a matter for you to decide. If you are happy with the tenant, the risks to the property are low, its not a multi tenanted property, etc etc then simply carry on. Have a look at the standard Lease just to set your mind at ease.

  3. #3
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    4,774

    Default

    Wayne, I actually think it depends on the size of the annual rental they pay.

    If it's quite a substantial property with quite a sum of rent (like say $40k or more) then I'd definitely have a Deed of Lease. I usually get my solicitors to prepare these and split the cost (around $800 these days, which is ridiculous, it's a 1/2 hour job) with the tenant.

    But if it's a smaller unit then the Agreement to lease will be fine.

    The thing is, if a tenant goes under, or buggers off, having a Deed of Lease wont' help you that much. The only bit of it that is good IMHO, is the personal guarantee bit. But other than that, the thing is, if they have no money, you're stuffed anyway. Adn if they do have money, you have to take them to court, which is expensive and usually not worth it - unless they owe you quite a lot of money.

    If they bugger off owing you $10k, there's no point taking them to the district court because it will cost you $30k to get them there. You just pursue them with a debt collector, try and get them in the Disputes Tribunal etc.

    So this is why I say it depends on the rental amount, with a bigger rent they end up owing you more money quicker, so more worthwhile having the Deed of Lease and being able to pursue them in the courts etc.

  4. #4
    Join Date
    Jun 2004
    Posts
    4,143

    Default

    The Deed of Lease form is available from the ADLS so would I need a lawyer? Or does a lawyer have to register it or something?

  5. #5
    Join Date
    Jun 2004
    Posts
    4,143

    Default

    Anyone know where I can get an Agreement to Lease other than buying 10 from ADLS? Whitcoulls used to sell that sort of stuff in singles but they don't seem to now.

  6. #6
    Join Date
    Dec 2010
    Location
    Auckland for work, Counties Manukau for home
    Posts
    1,106

    Default

    You don't have to use a lawyer to draft the deed of lease. If you think the form unchanged is good enough then go to it.

    If however you have lots of additional terms you'd be mad not to use a lawyer. Too many people think they can draft comprehensible clauses, when they can't and write gibberish that has on occasion (when one client got carried away with double negatives) meant exactly the opposite of what they intended.

    Not sure where you can get the forms other than ADLS sorry.

    As for the Agreement to Lease vs Deed of Lease, you can do without if you must. A well drafted Agreement to Lease is perfectly enforceable and incorporates the Deed of Lease terms. Note use of the words "well drafted". Problem is a lot of Agreements to lease, usually written up by the agents, need to be cleaned up.

    Banks and valuers do like to see Deeds of Lease....thats a not unimportant consideration. Here's another...your agreement to lease may list all sorts of payments and obligations by the landlord in terms of paying for the tenant fitout. Do you want the valuer/bank reading over that and discounting your effective rent?

    PS: Don't think the District Court is as bad as you think for summary judgments Davo...it can be worthwhile. But obviously the important part is whether there is any money to chase.
    Last edited by Ivan McIntosh; 05-11-2012 at 11:06 AM.

  7. #7
    Join Date
    Jun 2004
    Posts
    4,143

    Default

    In this case the rent is only $30k. The form I want to use is the 'standard' 4th edition ADLS Agreement to Lease (ATL) with a couple of clauses removed (like 4.1 for the tenant to pay for Deed). The origional ATL was for 1 yr with 1yr right to renew - we are now coming into the 3rd yr and they have agreed to continue on the same terms (with small rent increase) but I want more than an email so thought I would just do an ATL and get them to sign. That lead to the question on how much protection the ATL actually provides and you have all answered that very well thanks.

    I agree Ivan re the terms - I wouldn't even think about trying to draft new terms without my lawyer sorting it, just not worth the risk. Lawyers aren't cheap but they are not THAT expensive.

    I suppose I will buy 10 forms and have a few spare.

  8. #8
    Join Date
    Dec 2010
    Location
    Auckland for work, Counties Manukau for home
    Posts
    1,106

    Default

    Wayne,

    There's a new version Agreement to Lease due out in two days on the 7th.

    You can run your eye over a marked up version here (along with a bunch of other pending change ADLS forms)...shows the changes since the last version

    http://http://www.adls.org.nz/resour...ms-and-addenda

  9. #9
    Join Date
    Jun 2004
    Posts
    4,143

    Default

    Thanks for that Ivan - I'll wait then for the new one.

  10. #10
    Join Date
    Sep 2007
    Location
    Auckland
    Posts
    4,774

    Default

    PS: Don't think the District Court is as bad as you think for summary judgments Davo...it can be worthwhile. But obviously the important part is whether there is any money to chase.
    I know people who have spent $30k chasing people, with their lawyers effectively saying "You have a watertight case" only for them to not get a cent back.

    You really only do this to punish the offender, not to do well financially out of it.

    These guys always seem to have nothing in their own names. The wife owns the house and everything in it. Their car is financed up to the eyeballs and so on.

    So Ivan, how do you tell if someone 'has money' before you begin proceedings against them?


 

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