When Is A Building “Untenantable”?

When Is A Building “Untenantable”?

Recent events in Christchurch have highlighted the necessity for landlords and tenants alike to be familiar with their commercial lease agreements. The contents of such agreements, however, are often not what they seem. Landlords and tenants should be aware that some seemingly “normal” terms are given specific legal interpretations. An example of this can be found in clause 26.1 of the current version of the Auckland District Law Society (ADLS) Deed of Lease, the most common form of commercial lease. That clause sets out (emphasis added): If the premises or any portion of the building of which the premises may form a part shall be destroyed or so damaged (a) as to render the premises untenantable then the term shall at once terminate; or (b) in the reasonable opinion of the Landlord as to require demolition or reconstruction, then the Landlord may within 3 months of the date of damage give the tenant 20 working days notice to terminate and a fair proportion of the rent and outgoings shall cease to be payable as from the date of damage. Any termination pursuant to this clause shall be without prejudice to the rights of either party against the other. While what constitutes “untenantable” might be clear to a landlord or tenant, the law may set a different standard. In fact, the law may set many conflicting standards. What is “untenantable” in the eyes of the law? The concept of “untenantability” was first examined in DFC NZ Limited v Samson Corporation Ltd in 1994. The court decided that “untenantable”: [M]eans no more nor less than able to be used and enjoyed by a tenant....