A Landlord's Guide to Leasing to Franchise Tenants

Franchising is serious business in New Zealand.  If you go to any mall in New Zealand you will find a number of the outlets are operated by franchise tenants.  In fact there are probably more than you think.

To some extent, leasing to a franchise tenant is no different to leasing to any other commercial tenant.  However, there are issues which a landlord should be aware of and take into consideration when leasing premises to franchisee.

Who is the tenant?

Often franchisors negotiate the terms of the lease but the tenant will be the franchisee.  Other times franchisors will negotiate and enter into the lease either themselves or via a special purpose company specially set up to hold the lease and then they will sublease or licence the premises to the franchisee.

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NPS on Urban Development Signed Off

A few months ago we looked at Minister Nick Smith's 2 June announcement that the proposed National Policy Statement (NPS) on Urban Development Capacity was available for public consultation.

On 31 October 2016, the Minister announced that the Government had signed off on that NPS, and that it would take effect from 1 December. 

The councils experiencing the highest growth will be most affected.  That means Auckland, Christchurch, Tauranga and Hamilton are in the frontline.  Fast-growing cities like Nelson and Queenstown are also affected. 

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New Swimming Pool Fencing Law Passed By Parliament

Parliament has passed the Building (Pools) Amendment Bill, which the government claims will strengthen pool safety compliance and reduce the accidental drowning of children

Splashing around in a swimming pool during the summer is a joy for many kiwi children, but the safety risks of having young children around swimming pools, particularly when unsupervised, are undeniable.  In 1987, in a bid to reduce the number of accidental drownings of children, Parliament passed the Fencing of Swimming Pools Act, which required all swimming pools to be fenced.  The introduction of this requirement has significantly reduced the number of accidental drownings, but in recent years the government has expressed concern that the requirements have not been enforced consistently across New Zealand, and that the enforcement tools available to local authorities for non-compliance were deficient.

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RMA "Subdivision", GMOs and Road Stopping Notice / Consultation - A Spring Round Up of Decisions You Should Know About

We shine the spotlight briefly on three recent decisions of the Environment and High Courts concerning:

1. Whether certain property arrangements for leased land fell within the RMA definition of "subdivision" (Re Spark New Zealand Trading Ltd [2016] NZEnvC 115);
2. Whether the RMA enables regional councils to provide for GMOs in regional policy statements and plans (Federated Farmers of New Zealand Inc v Northland Regional Council CIV 2015-488-64); and
3. What is considered to be adequate public notice and consultation on road stopping proposals under Schedule 10 of LGA'74 (Morgan v Waikato District Council [2016] NZEnvC 177).

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Topical Issues for Tenants When Negotiating Agreements to Lease

Too often we are asked to review Agreements to Lease which have already been entered into by the parties.  Of course this is too late.  And it can be so disappointing because we can immediately see areas where we could have added value and even have saved our client money or reduced their risk.  Of course there is a cost to having a lawyer review an agreement to lease but this does need to be weighed up against the long term and serious financial implications involved.  A $100,000 per annum lease for a term of 10 years will be over a million dollar commitment not including the reinstatement obligations and the ongoing liability on assignment.

If you are a franchisor who is involved in the lease negotiation phase then you will appreciate the importance of making sure your lease negotiations are sound, as the terms of the lease can often be the difference between converting a franchise prospect into a franchisee or not.

We wanted to touch on a few areas in the lease negotiation phase which come up again and again and which have been highlighted by recent cases.

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The Unitary Plan and related reports

Auckland Council released its Decisions on the Proposed Auckland Unitary Plan on Friday 19 August 2016.  This Plan heralds a new era of planning for the region and its provisions will be of interest to many.  The Plan and related reports  may be viewed here.