We don’t stand apart. When briefed by a client we become an embedded part of the team. We engage our depth of knowledge and commercial acumen to swiftly identify what’s required from the outset – and set about delivering it. It’s not a revelatory approach, but it is refreshing, competitive and deeply efficient – and enjoyable.It has earned us a market reputation as a leader in our areas of expertise where we have established:
A prominent position on the “All of Government” external legal services panel.
A substantial public and private sector client base.
Regular appointments to nationally significant projects.
“They operate with a level of charisma in the room – certainly not order takers. They sense the gaps then find the solutions.”
To ensure our specialists are always where they’re needed, we operate as one firm with hubs in Auckland, Wellington and Christchurch. We advise on a range of public and private sector projects.
In 2020 and 2021 Greenwood Roche has advised on the acquisition by overseas investors of two separate hotel businesses, advising on sale and purchase terms for the land and business and application of the overseas investment rules, conducting due diligence, drafting and advising on management contracts, advising on liquor licensing, advising on transitional hand-over arrangements and generally arranging for completion of the transactions to occur with minimal disruption to the business.
Our work here builds on significant experience across different team members’ work on previous hotel transactions, including large international hotel chains throughout New Zealand.
Greenwood Roche assisted Hāpai Commercial Property Limited Partnership with the establishment of its partnership with Ngāi Tai ki Tāmaki Trust and the new entity’s acquisition of the 13 hectares of land under Macleans College in Bucklands Beach, Auckland in what has been reported as the largest Treaty-based school transfer.
Our work included advising on and implementing the joint venture structure, undertaking due diligence on the property, assisting with the financing of the transaction and settling the acquisition.
The acquisition was part of Ngāi Tai ki Tāmaki’s Deed of Settlement with the Crown, which was finalised in 2018, and included the leaseback of the land to the Ministry of Education.
Ngāi Tahu and the Accident Compensation Corporation have announced the development of a new office complex in Dunedin.
Greenwood Roche lawyers Bob Roche and Sam Green recently assisted ACC with the development of a new office building in Dunedin through a 50/50 partnership with Ngāi Tahu.
The Dunedin hub is essential for ACC’s national operations and this purpose-built four-storey complex will house 650 staff who are currently spread across four separate buildings.
Construction of this modern and environmentally friendly building is set to start this year. The 8,000 square metre building will be located on Dowling Street.
At over 20,000m2 of space, the redevelopment of a landmark Wellington building has provided the New Zealand Government’s largest Ministry with a substantial new National Office.
Greenwood Roche has successfully assisted the Ministry for Business, Innovation and Employment in the redevelopment and lease of MBIE’s new National Office premises in Wellington.
Greenwood Roche has continued to provide advice to MBIE throughout the course of the redevelopment, including assisting with the sale of the building to an NZX-listed property investment company during the project.
MBIE’s new National Office is one of a number of substantial redevelopment projects within Wellington on which Greenwood Roche has acted.
Greenwood Roche represented Transpower New Zealand Limited in relation to the redevelopment and lease of Transpower’s future national head office at Boulcott Street, Wellington.
Transpower plans, builds, maintains and operates New Zealand’s high voltage electricity transmission network. The new premises will house around 500 staff and the 24/7 control room for the National Grid. At approximately 8,400m2, the Boulcott Street transaction is one of the largest commercial office leasing deals in New Zealand this year.
The Greenwood Roche team included partner John Greenwood and principal Doran Wyatt, both based in the firm’s Wellington office.
Greenwood Roche represented the Ministry of Education on the redevelopment and 15 year lease of the Ministry’s new national head office at 33 Bowen Street, Wellington.
At approximately 13,100m2, the Bowen Street transaction was a full building lease and one of the largest commercial office leasing deals in New Zealand for the year. Greenwood Roche assisted the Ministry on all aspects of the negotiation and documents for the transaction, which included substantial refurbishment works, a seismic upgrade for the building and an integrated fitout.
The Greenwood Roche team for the deal were partner Jeannie Warnock and principal Doran Wyatt, both based in Wellington.
Kiwi Income Property Trust, one of the country’s largest listed property investors, is undertaking a $67 million redevelopment of its property at 56 The Terrace, Wellington, for lease by the Ministry of Social Development.
We are advising Kiwi Income Property Trust on this project. Our work has included advising on the development agreement and the 18 year deed of lease with the Crown and preparing and advising on the construction contract for the development works.
New Zealand Post has recently commenced operations at its new Manawatu Co-located Processing Facility.
Comprising over 7,000 square metres including a mail processing warehouse, staging interchange areas, and associated office accommodation (and a combined investment of over $10 million), the facility houses NZ Post’s mail processing functions for the entire lower North Island.
The facility is situated in the heart of Palmerston North’s main industrial area, and is strategically convenient to all major transport systems in the city (including the airport, state highways and rail network).
Greenwood Roche assisted NZ Post on the development, construction and leasing aspects of the facility. The development agreement provided for delivery of tenant works as a variation to the landlord's main contract and early engagement of the Main Contractor on a fixed margin open book basis. Both features enabled the project to be completed seamlessly to a tight schedule while maintaining the appropriate distribution of risk and responsibility between the parties.
Watercare Services Limited is responsible for providing water and wastewater services to the greater Auckland region, and employs a large number of people across many different teams.
We acted for Watercare in relation to its new head office premises located in Newmarket, Auckland. This was a significant project, involving the negotiation of a comprehensive redevelopment agreement and subsequent deed of lease, and further extensive advice in relation to Watercare’s ability to terminate its existing tenancies at that time.
As part of New Zealand Post’s strategy to release capital from its corporate properties, it sold the landmark New Zealand Post House in Wellington to listed commercial property company Argosy Property in 2013.
We acted for New Zealand Post on the sale and leaseback of New Zealand Post House and on the negotiation of a comprehensive development agreement committing the purchaser to undertake a $40 million extensive redevelopment of the building.
The sale, for $60 million, was one of the single largest commercial real estate deals completed in Wellington in 2013.
Tainui Group Holdings and the Accident Compensation Corporation have announced the development of a $50m-plus Hamilton office complex.
Greenwood Roche lawyers Bob Roche, Sam Green and Jane McDiarmid are assisting ACC with a significant office consolidation project, which has recently reached a milestone with the conclusion of a development agreement for a new office building in Hamilton.
At each of ACC's main hubs, Dunedin and Hamilton, we are advising ACC on the RFP process for new office accommodation, development agreements for the design and build of new office buildings and the deeds of lease. Each building will have office space of approximately 8,500 square metres and will be significant construction projects for these cities.
The new Hamilton building will be developed by Waikato-Tainui and will be located on the corner of Collingwood Street and Tristram Street. The building is designed as a state of the art, low-rise, three-pavilion building and will be a substantial boost for the Hamilton CBD.
Greenwood Roche has assisted Westland Dairy Company Limited with its $26 million Ocean Outfall Pipeline project.
Our work involved drafting and negotiating land occupation and easement documentation with the Westland District Council for the deaeration chamber and the pipeline and drafting construction contracts for the two stage pipeline project. The pipeline and deaeration chamber due for completion in the first quarter of 2021 will convey treated wastewater from Westland Milk’s Hokitika dairy factory, remove the air and discharge it into the ocean via an 800 metre underwater pipe. The company considers it is a more acceptable environmental solution and more sustainable system than the current system of discharge into the Hokitika River.
Greenwood Roche has assisted Corisol New Zealand Limited with acquisitions and overseas investment applications for forestry.
Our work involved negotiating and documenting agreements for sale and purchase for various land blocks, due diligence, overseas investment office applications and various ancillary documentation.
Greenwood Roche assisted Ōtākaro Limited to negotiate a long awaited car park building solution for Christchurch Hospital.
Our work involved negotiating and documenting an agreement with a number of other parties including CDHB, LINZ and Ngāi Tahu.
New Zealand’s COVID-19 alert level restrictions have placed under scrutiny "no access in emergency" provisions in leases. These provisions generally require an abatement of rent and outgoings when a tenant is unable to fully access the leased premises to carry out its business due to an emergency. In most cases, these clauses will apply during Covid-related lockdowns. In this article we examine recent case law on their interaction with the statutory right to cancel for breach.
Under sections 245 and 246 of the Property Law Act 2007, a landlord can cancel a lease after serving notice on a tenant for non-payment of the rent or a breach of other obligations under a lease (such as the obligation to pay outgoings). The recent High Court case of SHK Trustee Company Limited v NZDMG Limited serves as a warning to landlords who intend to cancel a lease for non-payment of rent and outgoings during an emergency.
The landlord leased an office and a warehouse space to a kitchen manufacturer under two separate leases. The leases were on the widely-used Auckland District Law Society (ADLS) deed of lease, which includes a “no access in emergency” provision at clause 27.5. The tenant ceased rental payments from the first day of the first alert level 4 lockdown on 26 March 2020 and claimed a rent abatement under the “no access” clauses in the leases.
In August 2020, the landowner served a notice on the tenant informing the tenant that it was in default of its obligation to pay the rent and outgoings and requiring that the outstanding sums be paid within 30 working days. The notice made no allowance for the required abatement of rent and outgoings due to the “no access in emergency” clauses. After the tenant did not comply with the notice, the landlord cancelled the leases, took possession of the premises and later commenced summary judgment proceedings to recover the rent arrears.
The High Court declined the landlord’s application in respect of the amounts claimed as the landlord had failed to provide for an abatement of the rent in light of the ongoing pandemic.
As this was a summary judgment application for unpaid rent, the Court was not able to assess what the “fair proportion” abatement should have been (as this is “an evaluative exercise that cannot be done on a summary judgment application”) or determine whether the landlord’s breach notice was invalid. If the breach notice was invalid, the cancellation of the leases would have been unlawful. The Court stated that it was arguable that the breach notice was invalid on the basis that it did not make an allowance for the required abatement of rent and outgoings under clause 27.5 of the leases. The Court recommended that the landlord ought to have obtained an authoritative determination of the rent payable by suing the tenant and obtaining a formal judgment of the unpaid rent, or to have only served the breach notice for the undisputed rent arrears.
The case is an illustration of the risks involved in serving breach notices. Where claimed rent arrears relate to a period during which the rent abates under the terms of the lease or due to a statutory entitlement, landlords must draft breach notices with caution. Landlords might choose to rely on outstanding rent or outgoings payable in respect of non-abatement periods, agree the abated “fair proportion” with tenants or obtain judgment through legal proceedings as to the amount owing under the lease during the abatement period. Landlords also need to consider statutory interventions due to the COVID-19 pandemic (such as the COVID-19 Response (Management Measures) Legislation Bill) – relying on the words of the deed of lease alone may not be sufficient.
The New Zealand Government has introduced the COVID-19 Response (Management Measures) Legislation Bill (Covid Bill), which passed its first reading on 29 September 2021 before going to the Finance and Expenditure Select Committee. Submissions to the Committee are due by 5 October 2021, with the Committee to report to the House on 14 October 2021.
The Covid Bill amends several pieces of legislation. In this note, we focus only on the proposed amendments to the Property Law Act 2007 (PLA).
This is the second attempt at implying rent abatement provisions into commercial leases since Minister Little’s proposals in 2020, which did not make it beyond a Cabinet paper.
The Bill has received criticism both within and outside of Parliament for cutting across existing commercial leasing contracts, and the press release by the Government announcing the Covid Bill did not indicate the extent to which a lack of rent abatements is a problem in commercial leases.
The Property Council and a number of significant figures in the property industry have come out in opposition, noting the issues around defining the quantum of a rent abatement. Interestingly, the Property Council is seeking to gather information from its members about abatements or deferrals already agreed. The results may be a useful indicator as to whether there is a widespread problem necessitating Government intervention, or otherwise.
Key proposed changes to the PLA
From 28 September 2021 a “no access in an emergency clause” (implied clause) is implied into leases that do not include such a clause that covers an epidemic: Unamended ADLS leases from 2012 onwards already contain a similar clause and will not be affected by the proposed legislation, but other forms of leases such as Property Council leases and bespoke leases will need to be considered on a case by case basis.
The implied clause is triggered when a tenant “is unable to gain access to all or any part of the leased premises to conduct fully their operations from all or any part of the leased premises, because of reasons of health or safety related to the epidemic”: What “fully” conduct means is to be determined and may cover situations where the tenant is operating in the premises sub-optimally, such as restrictions to capacity, customer access or social distancing requirements.
The implied clause provides that a fair proportion of rent and outgoings will abate under the lease during the period of the tenant’s inability to access all or part of the leased premises, backdated to 28 September 2021 (but possibly earlier), and ending when the inability ceases: A “fair proportion” is not defined and nor is there any guidance on this. Much will depend on the circumstances, and negotiated outcomes will vary depending on the nature of the tenant’s business, the premises and the terms of the lease. The provisions around when the abatement commences are unclear. We expect these will be further developed in Select Committee.
The implied clause will not apply where the parties have already agreed contractually to vary the rent payable if access to the premises is restricted because of an epidemic (a “pre-commencement rent variation agreement”) and the agreement applies to the period covered by the implied clause: The implied clause might therefore apply for some of the period not covered by the pre-commencement rent variation agreement.
Until the landlord and tenant determine what a fair proportion is, a landlord cannot terminate a tenant’s lease for non-payment of rent and outgoings: Section 246 of the PLA has not been amended so, a landlord may still cancel a lease for breach of other covenants of the lease.
Any dispute about what is a “fair proportion” is to be referred to arbitration under the Arbitration Act 1996. Arbitration could be expensive and lengthy: This does not preclude the parties from agreeing other methods of dispute resolution.
This rent abatement is specific to the COVID-19 epidemic: It is expressly repealed when the Epidemic Preparedness (COVID-19) Notice 2020 expires or is revoked.
The implied covenant may be negatived, varied or extended by express agreement after 28 September 2021: Relying on clauses in existing leases which exclude implied terms in the PLA will not be sufficient to exclude this implied covenant.
What can a landlord or tenant do?
Until the Covid Bill achieves Royal assent, landlords are not legally obliged to offer a rent or outgoings abatement where they do not have clause 27.5 of the ADLS lease (or a similar clause) in their leases. This is obviously a hard-nosed approach to be taken by landlords, but not an illegal one. Though the Covid Bill is only proposed legislation, tenants have been given a certain level of bargaining power to start discussions to achieve a rent and outgoings abatement and landlords can expect to see an increase in requests of this nature. Similar requests occurred shortly after Minister Little’s announcement in 2020.
Regardless of the passing of the Covid Bill, landlords and tenants are still free to come to agreement on a rent and outgoings abatement. Provided they agree from 28 September 2021, this will exclude the implied rent relief provisions in the Covid Bill entirely, perhaps in return for some other consideration. One particular incentive for the parties to agree an abatement is the lack of guidance over “fair proportion”. It is our experience that parties often pre-agree fixed discounts that will apply for Alert Levels 3 and 4.
We strongly recommend that landlords do not take any action to terminate leases for non-payment of rent and outgoings without seeking advice first. Particular caution should also be exercised as to whether a landlord calls on a bank guarantee or other security in respect of rent and outgoings, which may later be found to be properly subject to abatement from 28 September 2021. The Courts have regularly made decisions favourable to tenants, where landlords have acted aggressively in uncertain situations.
What leases are intended to be caught?
Leases which already contain a “no access in an emergency clause” are excluded from rent abatement provisions in the Bill.
The proposed wording of the “no access in an emergency” provision is close to, but not the same as, the wording used in clause 27.5 of the ADLS lease. However, by way of example, the equivalent clause 7.5(c) of the Property Council office lease is less clear in that:
the concept of “no access in an emergency” has slightly different triggers (such as the narrower concept of “inaccessibility”); and
there is also an additional requirement before a tenant may obtain rent relief, being that the landlord must be able to collect loss of rent insurance.
Is clause 7.5(c) of the Property Council office lease a “no access in an emergency clause” for the purposes of the Covid Bill? It is questionable and will likely be the subject of legal debate. However, the overall intention appears to be that, if there is a clause in a lease that operates akin to clause 27.5 of the ADLS lease, the implied clause proposed pursuant to the Covid Bill will not apply.
Watch this space
The Covid Bill is proceeding quickly through the Select Committee process and we can expect some strong submissions and public comments to be made before the Covid Bill is passed.
If you would like any further information about the effect of the PLA changes or how to deal with them, please contact Antonia Shanahan, Steve Woodfield, Mark Hay, Simon Mee or any of our experienced property lawyers.
Construction Verdict highlights some of the most important legal developments during the last few months relating to the building and construction sectors.
Construction Contracts (Retention Money) Amendment Bill
In early June Parliament introduced the Construction Contracts (Retention Money) Amendment Bill which, if passed, will further amend the retention regime under the Construction Contracts Act 2002 (CCA). The proposed changes address shortfalls in the current regime, such as situations where an insolvent contractor has co-mingled retention funds with its working capital, and its subcontractor is barred from recovering the full sum.
The headline changes are:
On seven occasions during an eight year period, pine trees growing in a commercial forest fell onto an electricity line running through the forest causing damage to the line. In a recent judgment, the Court of Appeal held that the owner of the trees was liable to the owner of the line for the damage caused.
The case confirms that landowners can be liable for damage caused by their trees despite the trees being outside the “growth limit zones” imposed by the Electricity (Hazards from Trees) Regulations 2003 and despite the owner of the electricity line not having a registered easement for the line.
The electricity line was constructed in the late 1960s or early 1970s by a predecessor electric power board to the current owner of the line, Unison Networks Limited. Section 22 of the Electricity Act 1992 permits Unison Networks to keep the line on the land, and section 23 allows Unison Networks to have access to the land to maintain the line. No registered easement is needed for the line.
The property was acquired by the current owner in the early 1990s and converted to forestry in 1994.
The Electricity (Hazards from Trees) Regulations 2003 sets growth limit zones measured out from electricity lines. The growth limit zone for the line here extended only for 2.5 metres. Under those regulations, line owners can require that tree owners cut or trim trees which extend into the growth limit zones. Here, however, the trees were located outside the growth limit zones, with damage to the line caused by trees falling over during or following adverse weather.
The Court of Appeal agreed with the earlier High Court judgment that the tree owner was liable to the line owner in “nuisance”. A nuisance is an ongoing or recurring activity or state of affairs that causes a substantial and unreasonable interference with the plaintiff’s land or the plaintiff’s use and enjoyment of that land.
Normally a nuisance occurs in the context of neighbouring properties; the defendant will cause something to emanate from the defendant’s land, like smoke or noise, which interferes with the plaintiff’s use of adjoining land. Here, the lines and trees were on the same land but both the High Court and Court of Appeal were comfortable that the tort of nuisance could apply in this situation. As noted by the Court of Appeal, the trees were, in effect, emanating from Nottingham Forest’s land and causing damage to Unison’s property.
The key factor here was the repetitive nature of tree falls. A succession of trees, which had grown to a height greater than their distance from the line, fell onto the line and caused damage. Given the inevitability of tree falls, the Court of Appeal had no doubt that it was unreasonable for Nottingham Forest to allow trees to grow to the height at which they would cause damage to the line if they fell. By creating this state of affairs, Nottingham Forest was strictly liable for any resulting damage, and could not avoid liability by showing that all reasonable precautions had been taken.
This was a novel case, although it pulled together strands of settled law, and could have widespread application especially to commercial forest owners. It clarifies that the Electricity (Hazards from Trees) Regulations 2003 do not oust common law liability for damage to electricity lines caused by trees and that, in circumstances involving a series of events, landowners could be strictly liable for that damage. As shown in this case, liability can exist where the trees are outside the “growth limit zone” but within falling distance of the line, where the trees are otherwise healthy and where the line is protected by a statutory right rather than a registered easement.
Julian Smith from Greenwood Roche advised Unison Networks on this claim, and has advised other electricity lines companies on tree management issues – amongst other things – for more than 20 years. We can also advise forestry companies on their obligations here and the impact on potential plantable areas.
The Government recently proposed to introduce changes to the Construction Contracts Act (CCA) seeking to strengthen the retentions regime. The Construction Contracts (Retention Money) Amendment Bill (Bill) proposes a number of clarifications and requirements on the retention regime under the CCA. We run through the main elements of the changes.
What are retentions?
Retentions secure performance obligations under a construction contract. A retention is used as a form of security for a party such as a Principal to ensure that the other party (Contractor) performs its obligations under the construction contract. Retentions are generally held until final completion or until the end of the defects liability period.
Issues have arisen where the party holding a retention (Party A) has become insolvent, and the party whose funds are being held (Party B) is left unable to access those funds due to the being comingled with the holding party’s other funds.
The Bill purports to deal with these types of scenarios.
Key Proposed Changes
If the Bill passes in its current form, it would mean any party holding a retention, Party A, must hold that retention:
Replacement of Temporary Emergency Notification Regime with new National Security and Public Order Regime
On 25 May 2021 the Government announced the emergency notification regime (ENR) would end, at least until further notice. The ENR was part of the Government’s response to the Covid-19 pandemic and came into force in June 2020 under the Overseas Investment (Urgent Measures) Amendment Act 2020. The ENR was required to be reviewed every 90 days thereafter with Ministers required to assess whether the effects of the pandemic justified the ENR remaining in place.
Associate Finance Minister David Parker said in a statement on 25 May 2021, that “our successful management of the health impacts of the pandemic and the recovery of the economy, with lower unemployment and stronger growth than forecast last year, mean we can remove the temporary protection.”
Transactions entered into from 7 June 2021 will not be subject to the ENR, although transactions entered into prior to this date will still be subject to the notification requirement. Further changes coming into force shortly under the Overseas Investment Amendment Act 2021 mean that the ENR may be reinstated where there is an emergency justifying such reinstatement.
National Security and Public Order Notification regime
The ENR will be replaced by a call-in power – known as the national security and public order notification regime (NSPO). This regime will apply to transactions entered into on or after 7 June 2021.
The NSPO regime will apply to investments in strategically important businesses (SIB) that would not ordinarily require consent under the Overseas Investment Act 2005 (Act). The NSPO regime will allow the Government to “call-in” certain transactions and consider whether such investments pose a risk to national security and public order, and gives the Government power to impose conditions on these investments (or if required, to block or unwind the transactions) when it is considered they give rise to significant national security or public order risks. It is intended that the call-in power will be used as a backstop power only and interventions will be rare and only used where necessary.
Strategically Important Business
A SIB includes a business: