Leasing your unit to a commercial tenant

Relevant law and lease documentation

The Unit Titles Act 2010 (UTA) is the law governing unit title developments. Some unit title developments (for example office buildings) are intended for commercial or industrial use. Units in these developments are often leased by the unit owners to commercial tenants. Usually, those letting arrangements are recorded in formal legal documentation, such as a deed of lease.

Several different areas of law, including the UTA, Property Law Act 2007 and common law, can impact on a unit owner leasing a unit in a development for commercial use. The body corporate operational rules for a unit title development will apply to a commercial tenant, as occupier of a unit in the development. However, the Residential Tenancies Act 1986 does not apply to commercial leases.

The most common lease arrangements in a commercial development are the lease of principal and accessory units by the unit owners. However, the body corporate is also able to lease parts of the common property to a tenant. If you are leasing accessory units, you can only do so as part of a lease that includes a principal unit or corresponding interest in a principal unit.

It is best practice to take independent advice when granting a lease over your unit for commercial purposes.

Responsibilities of Unit Owners

It is important for unit owners to know their responsibilities under the UTA when renting out a unit in a development. You should ensure that your tenant is not permitted to do anything under the lease which causes you to breach these responsibilities.

Any tenant of a unit in a unit title development will be bound as occupier to comply with the body corporate operational rules. Many lease documents will also require the tenants to carry out obligations which would usually be the responsibility of the unit owner under the UTA, for example maintenance of the unit.

Where this is the case, the tenant is accountable to the unit owner to ensure the obligation is met, and the unit owner remains accountable to the body corporate and other unit owners under the UTA.

Under the UTA a unit owner’s responsibilities to the body corporate and other unit owners and occupiers are to:

• repair and maintain the unit to ensure no damage or harm might be caused to the common property, infrastructure or other units
• carry out work ordered by a territorial authority or public body
• obey the body corporate operational rules applying to the unit title development. The default rules (which apply unless amended by the body corporate) state that:
  • an owner or occupier of a unit must not –
    • damage or deface the common property
    • leave rubbish or recycling material on the common property
    • create noise likely to interfere with the use or enjoyment of the unit title development by other owners or occupiers
    • park on the common property unless the body corporate has designated it for car parking, or the body corporate consents
    • interfere with the reasonable use or enjoyment of the common property by other owners or occupiers.
  • an owner or occupier of a unit must dispose of rubbish hygienically and tidily.
• permit the body corporate, or its agents, to enter the unit in an emergency or at any reasonable hour after giving reasonable notice for purposes including:
  • to view the condition of the unit to ascertain compliance with the owners or occupier’s obligations under the UTA and the body corporate operational rules
  • to maintain or repair infrastructure for services and utilities
  • to maintain or repair common property.

What is the relationship between unit owners, tenants and the body corporate?

The tenant of a unit in a unit title development must comply with the body corporate rules. If a tenant has an issue with the body corporate or another occupier they should first talk to their landlord about resolving that issue.

Similarly, to resolve any issues with a tenant, the body corporate should go through the landlord/unit owner.

Where can I find more information?

For Unit Titles advice and information call 0800 UNIT TITLE (0800 86 48 84), visit the Unit titles developments section of our website or email us at info@dbh.govt.nz