Winter 2007
The Property Law Update is produced to keep you up to date with the
developments in the law relating to property. We look at legislation
and cases covering property and personal law issues (such as leases,
mortgages, easements, sale of land, family law, trusts and assets management
etc.), as well as environmental concerns and local government matters.
If you would like to know more about any of the topics covered in this
update, please contact us.
This update is produced by our Property and Private
Services Group and the Resource
Management teams.
This issue:
- Subscribing to our update
Changes to the law mean that after August
2007 subscribers who have not given their consent to receiving
commercial electronic messages must opt_in to electronic publications. more
- Lease drafting and market rentals
An Australian case reaffirms the importance of good drafting when
stepping outside the standard terms contained in common leases,
such as the ADLS. more
- Terminating leases
Landlords need to follow the correct termination procedures even
where rent is in arrears. more
- Grafitti Bill success
Manukau City Council found it was running out of options to deal
with the problem of graffiti defacing its community. It asked Brookfields
for advice on additional regulatory powers. more
- Developer awarded compensation
After a five year battle, the Environment Court has ruled on how
a local developer should be compensated for extra road building
costs. more
- Publications
Brookfields is committed to keeping its clients up to date and produces
regular updates on the law. You are welcome to subscribe to any
of these. more
Subscribing to Brookfields Publications
In September 2007 the new Unsolicited Electronic Messages Act will
come into force. Recipients of Brookfields' newsletters and updates
have in the
past agreed to receive this material and we will continue to send you
this publication on the strength of that agreement.
However, if you no longer wish to receive these email newsletters,
please unsubscribe now.
If there is someone who you think would like to receive our updates,
please ask them to visit our website at http://www.brookfields.co.nz,
where they should click on opt in.
For more information about the new Act, read Brookfields' Partner
John Ferner's article.
Lease drafting and market rentals
Eureka Funds Management Limited v Freehills Services Pty Ltd
[2006] VSC
Eureka leased premises to Freehills. The original lease was entered
into in 1991 with a subsequent lease in 1999.
The 1991 lease contained a provision in respect of any rent review
that any incentives provided to induce the lessee to enter into the
lease could not be considered when a valuer was determining the minimum
rent for the premises. This restriction was omitted from the 1999 lease.
However, the 1999 lease made specific direction in respect of the rent
review in 2003, namely that the "market rental value" should
be determined rather than the "market rental".
The parties could not agree on the rental at the time of the 2003
rent review and a valuer was appointed to determine the rent. It stated
in its report that it treated the "market rental value" as
synonymous with "market rental". On this basis Eureka filed
proceedings claiming that the rental determination was not made in
accordance with the lease.
Before reaching its decision the court noted that it can only set
aside the decision of an expert appointed under a contract in circumstances
of fraud, collusion or mistake. Where a mistake is alleged, it cannot
consider the process used by a expert, only whether the determination
was in accordance with the contract. The court also noted that when
analysing the terms of the contract this needed to be done having regard
to the contract as a whole and the surrounding circumstances.
The criteria which the valuer was "to have regard to" were
identical in determining both the "market rental value" and "market
rental". The lease provided no direction on how the valuer was
to have regard to the criteria listed.
It was important that the lessee did not receive any incentives inducing
its entry into the lease. Therefore, if when determining the new rent
the amount was to be measured against what other lessee's were paying
in comparable premises where inducements did exist, the lessee would
pay a new rental figure reflecting a non-existent incentive. The court
stated that clear and unambiguous language is required within the lease
for it to give effect to an unjust result.
Eureka was unsuccessful. The court held the valuer was entitled to
treat the terms as synonymous in the circumstances and the rental determination
stood.
Perhaps if a definition had been included together with different
criteria to be considered when determining the "market rental
value" the result would have been different. However, the
Court stated that even where the terms of two leases were identical,
different judgments may be given depending on the overall context
in which the leases exist.
This case reaffirms the importance of good drafting when stepping
outside the standard terms contained in common leases, such as the
ADLS. If any changes are being made to these documents, however minor
they may appear, erring on the side of caution and having the amendments
referred to a solicitor is essential.
For more information please contact: Deborah
Miller, Ian McCombe or Howard
Johnston (Partners, Commercial Property)
Terminating Leases
Hard To Find But Worth The Effort Quality Second Hand Books
v He (High Court, Wellington)
This case illustrates the danger landlords may place themselves in
by not following the correct procedure to terminate a lease despite
rent being in arrears.
The parties entered into an Agreement to Lease a commercial property.
Subsequently, the rent was not paid and the tenant ceased trading.
The landlord issued a Warrant to Distrain (which allows the landlord
to authorise a person to enter onto the property on their behalf to
seize and sell the tenant's goods to recover rent), collected several
chattels and prepared an inventory. The landlords' solicitor sent a
letter advising the tenant that if the rental arrears were not paid
within 5 days the landlord would exercise its right to re-enter the
premises and cancel the tenancy. Another letter was also sent, together
with copies of the warrant and inventory, advising that the chattels
would be sold by public auction if the rental arrears were not paid
within 5 days. No money was received. The landlord then gave notice
of termination but continued to hold the chattels.
On appeal in the High Court it was held that because the rights of
distraint and termination are concurrent but inconsistent, the landlord
had waived its right to terminate the tenancy once it elected to issue
the Warrant to Distrain. It then failed to exercise its rights under
the Distress and Replevin Act 1908 correctly (in that it compiled the
inventory with insufficient detail and it never sold the chattels by
public auction but held them in its possession) therefore acting illegally.
The tenants appeal was successful and considerable damages were awarded.
So long as the chattels were held the rent was deemed to be paid and
the tenancy could not be terminated for non payment of rent. Had the
chattels been sold but not provided sufficient money to discharge the
debt, then the landlord could have exercised its right to terminate
and re-enter the premises
The ability to distrain is an attractive but problematic tool allowing
landlords to take possession of the tenants' chattels to recover payment
of rent but the legal requirements must be strictly observed. There
are restrictions regarding what chattels must be left behind (necessary
tools of trade and household furniture). Chattels taken under distress
must be free from any charge or encumbrance such as a security agreement
under the Personal Property Security Act, otherwise their sale will
cause problems with the secured party.
While distraint is a 'self help' remedy it should not be used without
first taking legal advice.
For more information please contact: Deborah
Miller, Ian McCombe or Howard
Johnston (Partners, Commercial Property)
Grafitti Bill Success
When Manukau City Council found it was running out of options to deal
with the problem of graffiti defacing its community it turned to Brookfields
for advice on additional regulatory powers. As a result we drafted
and aided the introduction into Parliament of the Manukau City Council
(Control of Graffiti) Bill, which passed its second reading on 27 June
2007.
The Bill brings new powers to Council and the Police to deal with
graffiti in Manukau. In particular it:
- regulates the display of spray paint in retail premises and its
sale to persons under 18
- creates new offences of marking graffiti and carrying a graffiti
implement in certain circumstances
- gives the Council power to remove graffiti form private property
if it is visible from a public place
- creates infringement offences relating to the display and storage
of spray paint in retail premises and the marking of graffiti
- provides power for a police officer to require information and
to arrest a person suspected of committing an offence.
Brookfields is continuing to work with the Council in assisting the
Bill through the Committee stage with the expectation it will be passed
into law with its key provisions intact.
For more information please contact: Andrew
Green, Melinda Dickey or Linda O'Reilly (Partners,
Local Government Team)
Compensation for developer in Environment
Court
After a five year fight that went all the way to the Supreme Court,
the Environment Court has ruled that a local developer will be compensated
for the difference in cost between constructing an arterial road and
a local road. The Supreme Court had decided that it was not inherently
illegal for the Council to require Estate, (represented by Brookfields
Lawyers) to construct and vest the road, but it was up to the Environment
Court to decide how much the Council should contribute towards it to
render its requirement" fair and reasonable". Read
article
For more information please contact: Andrew
Green, Melinda Dickey or Linda O'Reilly (Partners,
Resource Management Team)
Publications
Brookfields produces a range of newsletters and updates on legal developments.
These include:
The Property Law Update
LGLaw and Public Law
Immigration
i-News
Employment Law
TrustLaw
If you would like to be notified when any of these publications are
issued, please contact
us.
Notice:
The items contained in this update are intended to be brief in nature
and should be used for information only. They should not be relied
on as legal advice.
Last updated: July 2007
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