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Residential vs. Commercial Tenancies in New Zealand: A Guide for Landlords

Tenancies in New Zealand typically fall into two categories - residential or commercial. It is important for a landlord to understand the difference between the two.

A residential tenancy refers to a tenancy where a property is being rented to live in. Residential tenancies are governed by the Residential Tenancies Act 1986 (“RTA”). The terms of a residential tenancy are ideally recorded in a Residential Tenancy Agreement signed by the landlord and tenant.

In contrast, a commercial tenancy refers to a tenancy where the premises are rented to carry out business activities. A commercial tenancy is usually recorded in a Deed of Lease signed by the landlord, tenant and, in some cases, guarantors. Commercial tenancies entered into from 1 January 2008 are governed by the Property Law Act 2007 (“PLA”).

Recently, there have been a number of instances where landlords have rented out premises using the wrong documentation. This is particularly so where residential and commercial tenancies operate from the same premises e.g. a residential unit is located above a commercial premises. In that situation, it is important that both a Residential Tenancy Agreement for the residential part and a Deed of Lease for the commercial part are signed between the landlord and tenant. Failure to do so, instead attempting to include both tenancies within one document, can lead to major problems. It can also have accounting and taxation issues.

Both the RTA and the PLA regulate the relationship between the tenant and the landlord, and set out the rules as to how events arising from the tenancy are to be resolved. The rights and obligations under both the Acts can be very different, as are the procedures they implement for management of the tenancy and resolution of any disputes. This means events arising from each tenancy need to be dealt with in a manner consistent with Act applicable to that type of tenancy. As such, it is important for a landlord to understand the type of tenancy they are dealing with and adhere to the applicable rules and procedures. If not, then it could lead to further issues for the landlord. Recently a Landlord was required to refund all rental paid and pay a fine for having rented out a converted garage to a family.

If you’re about to sign up a new tenancy, in a tenancy dispute or concerned as to whether you are fulfilling your rights and obligations, then contact us at Arnet Law. We have a lawyer for that!

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