Landlords, tenants, and building works

A recent judgment serves as a reminder for landlords to consider their obligations to their tenants when undertaking building works. In Alarm New Zealand Ltd v 15 Hopetoun Ltd, the plaintiff is a tenant of a commercial building in Freemans Bay. The building was sold to the defendant, who (unbeknownst to the tenant) obtained resource consent for a change of use to the building from commercial offices to residential apartments, and applied for a building consent for the associated works. The owner also intended to undertake seismic structural strengthening.

The owner’s engineers wrote to the Council, setting out the structural weaknesses in the building, and causing an earthquake prone building notice to be issued. As a result the owner gave notice under the lease that it would require full and uninterrupted access to the premises to carry out the structural strengthening work. The tenant was required to vacate and no compensation was offered.

MBIE subsequently determined that the earthquake prone building notice was incorrectly issued. The parties have gone to Court, with the tenant alleging that the owner knew the building did not meet the criteria required for the issue of the earthquake prone building notice, and that the entire removal process was manufactured by the owner and misrepresented the reasons why the tenant should relocate temporarily. The tenant wants its temporary relocation costs, loss of business profit, and legal expenses covered.

The final outcome of this case is yet to be decided, and if the tenant’s case is made out, this will be an extraordinary breach of good faith on the part of the landlord. While most situations will not be this extreme, negotiations with tenants around building works, especially where this may involve relocation, can be fraught. Both landlords and tenants should negotiate in good faith, and take advice regarding their rights and obligations under the lease.

 

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