Agreement to Lease or Deed of Lease

[Wayne]

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?

[Winston001]

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.

[Davo36]

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.

[Wayne]

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?

[Wayne]

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.

[Ivan McIntosh]

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.

[Wayne]

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.

[Ivan McIntosh]

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

[Wayne]

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

[Davo36]

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?

[Wayne]

Regarding the Deed of Lease - is it legally binding to just take the ADLS document, fill it out and get it signed? Does it need a lawyer on my part? The tenant will probably get their lawyer involved and if they made changes I would probably have to get my lawyer to check but what else would the lawyer do? Does the Deed need to be registered somewhere? Am I missing something - it all seems black and white to me.

The reason I am still thinking about the Deed is because the Agreement to Lease doesn't have anything re reinstatement etc.

[Ivan McIntosh]

It's not easy Davo. I generally search them (and, if known, their partners) on the LINZ register and companies office, do a credit check. If they have property in their own name then you're generally going to get something, but even then they can be mortgaged to the eyeballs. If they have nothing, you are often wasting your time.

Sometimes you can only suspect, not know, and need a judgment plus Order of Examination to get them under oath about what they do or don't have.

[Ivan McIntosh]

Regarding the Deed of Lease - is it legally binding to just take the ADLS document, fill it out and get it signed?

Yes.

Does it need a lawyer on my part?

No.

The tenant will probably get their lawyer involved and if they made changes I would probably have to get my lawyer to check but what else would the lawyer do?

Just as you say run their eye over the Deed of lease and the proposed changes and make sure they're done properly. Hopefully they have some commercial nous and can talk through practical effects of changes and things that you personally might wish to change.

Does the Deed need to be registered somewhere?

No, unless we are talking creating a leasehold title or a cross-lease.

Am I missing something - it all seems black and white to me.

The reason I am still thinking about the Deed is because the Agreement to Lease doesn't have anything re reinstatement etc.

Odds are your agreement to lease will incorporate the terms of the Deed of Lease by reference but, if it doesn't, you definitely need the broader provisions of the Deed of Lease.

[d2ba]

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.

Nice tip from Davo----a question in my case the rent is well below that figure for an upstairs office and tenant is on a 1 X 1 X 1 x 1--its not really worth it for them to have a yearly Deed of Lease --they are on the Agreement to lease that the agent did for us --now that the first year is over in a week or so where can i download the "agreement to lease form" (anyone have a link or pdf they can send me?) or can you reuse the original and simply change the dates?
thanks

[Ivan McIntosh]

You can't download a free copy, unless someone has typed it out or pirated an illegal copy somewhere....they get produced by the Auckland branch of the NZ Law Society. You can buy some hard copies here:

http://www.adls.org.nz/adlsi-store/legal-documents/hard-copy-forms/agreement-to-lease-fifth-edition-2012/

You need proprietary software to type information into them and print them out...it keeps track of how many forms you have left and you have to order more etc etc, plus the software itself is expensive, so not worth it for the casual user.

If you don't wish to pay for one, you could as you suggest probably re-use the original by photcopying it and whiting over the old dates etc, at your own risk.