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​Lease management standards and guidelines

Standards

Lease templates

  • Agencies shall use the appropriate government standard lease template as the basis for all new leases. Other lease templates shall only be used in exceptional circumstances, where it is not operationally and/or commercially practical to use the appropriate government standard lease template. Refer to the table ‘Government standard legal templates’ in the ‘Lease management guidance’ section for further information on the types of templates available.
  • Where agencies consider it is not operationally and/or commercially practical to use a government standard lease template, agencies shall provide the Government Property Group (GPG) with reasons why it would not be operationally and/or commercially practical to do so and obtain GPG's prior written approval.

Approvals

Prior to acquiring new leases, agencies shall ensure the appropriate approvals are obtained as follows:

  • All lease proposals with a whole-of-life-cost (WOLC) of up to $15 million, if funded from baselines and balance sheets require Chief Executive approval
  • All lease proposals with a WOLC between $15 million and $25 million, if funded from baselines and balance sheets require Minister approval
  • All lease proposals with a WOLC over $25 million (even if funded from baselines and balance sheets) require Cabinet approval.

Note that the financial thresholds above are GST exclusive. For further information on the financial thresholds refer to Cabinet Circular (10) 2.

Acquisitions, disposals and renewals

  • When acquiring new leases, agencies shall behave and negotiate with due regard to the impacts on other agencies operating in the same market.
  • Agencies shall obtain approval from GPG prior to acquiring a new lease, disposing of an existing lease or exercising a lease renewal, if approval has not already been obtained as part of the biennial approval required for agency property plans. The 'Request for approval process for the acquisition, disposal and renewal of leases’ and the approval form are available for agencies to use as a guide.
  • Where agencies are seeking approval through submitting an approval request form to GPG, agencies shall forward the request to GPG in advance of any critical decision date and/or prior to making a commitment.
  • Any approval obtained through the biennial property plan process or the individual approval request process will be overridden if it is in conflict with any future all-of-government initiative proposed by GPG.
  • When acquiring leases, agencies shall obtain an independent market rental valuation from a registered valuer, who is experienced in the commercial market and ideally has experience in the local market, before agreeing to the rental being proposed.

Rent reviews

  • Where a rent review has been initiated by a landlord, and there is no preagreed fixed rate rental review mechanism within the relevant lease (eg CPI adjustment or a stipulated percentage increase), agencies shall obtain an independent market rental valuation from a registered valuer, who is experienced in the commercial market and ideally has experience in the local market, before agreeing to the new rent. This applies even where the rental proposed by the landlord is a decrease in the annual rental. Prior to accepting a quote from a valuer to undertake a market rental valuation, agencies shall obtain written confirmation from the valuer declaring no conflict of interest exists.
  • Agencies shall ensure that any valuer engaged is informed as to what should be included and excluded in their market rental assessment and is provided with the relevant lease document and subsequent variations, if any.
  • Where there is a dispute between an agency and a landlord relating to the new rent, agency staff shall notify GPG at the earliest opportunity.
  • Agencies shall meet all lease obligations within the required timeframes as stipulated within the relevant lease.

Steps an agency should follow during a rent review

Records management

  • Any variation to an existing lease shall be recorded in writing (variation of lease) and executed by both parties.
  • Agencies shall attach all lease variations to the original lease.
  • All leases and lease variations shall be certified by way of a solicitor’s certificate.
  • All original leases and variations shall be held in accordance with the Records Management Standard for the New Zealand Public Sector which was issued under the Public Records Act 2005 and sets out the minimum requirements for the management of records by public offices.
  • Internal processes, controls and delegations shall ensure lease agreements and provisions within leases are executed by suitably authorised personnel.
  • Agencies shall enter all required property data into the GPP which includes but is not limited to uploading copies of new leases, lease variations, subleases, licences and settled rent reviews.

Guidelines

  • Agencies should ensure that the principles and objectives of their property strategy and plans are reflected in their lease management processes, which includes lease procurement, rent reviews, lease renewals and lease variations.
  • When negotiating a new lease with a landlord, an agency should aim to adopt a gross lease rather than a net lease.
  • Seeking GPG’s approval for acquisitions, disposals and lease renewals is best managed as part of the biennial property plan update where proposed actions are included and, once the property plan is approved, can be undertaken in a timely manner. If a proposed action has not been noted in the property plan, agencies are required to submit an approval request form to GPG. The approval request form can be obtained by contacting GPG. Refer to the ‘Request for approval process for the acquisition, disposal and renewal of leases’ and the approval form.
  • Agencies with sites in larger centres (ie Wellington and Auckland) should include GPG in their rent review process so that GPG can assist with achieving the best outcome by sharing information and experience.
  • Agencies should allow sufficient time to meet time critical lease obligations. This will ensure internal planning and consultation with appropriate stakeholders, GPG and/or other agencies can be undertaken. This will assist agencies to meet their obligations in a timely manner and achieve best value outcomes.
  • Agencies shall obtain independent advice and commission the appropriate valuations and building reports before entering into any new lease.
  • To avoid ambiguity around who is responsible for particular maintenance obligations, agencies should summarise lease obligations relating to both the landlord and the agency, to provide a reference guide for property and facilities staff. This will ensure agencies avoid incurring costs as a result of being in default of their lease obligations. It is recommended that the GPP is used to document such obligations and where possible, is used to run reports in relation to maintenance obligations.
  • When engaging independent advisors for lease management purposes, agencies should ensure they follow their internal procurement procedures. If there are no procurement procedures in place, agencies should obtain quotes or estimates from at least three external service providers.
  • Where there is a dispute between an agency and a landlord relating to a proposed market rental, agency staff should familiarise themselves with the rent review and rental dispute provisions of the relevant lease, and seek independent advice before engaging with the landlord or any party representing the landlord (eg agency staff may need to engage a third valuer to assess the market rental valuation report in dispute or require advice from a solicitor in regards to the rent review or rental disputes provisions contained in the relevant lease).
  • Prior to executing any lease, agencies should ensure that the content of the lease correctly reflects what was agreed between the parties during negotiations and that there are no errors contained within the lease.
  • Agencies are required to obtain a solicitor’s certificate prior to executing a lease and have a signed copy that is kept on the appropriate file and is uploaded to the GPP.
  • The purpose of a solicitor’s certificate is to provide confirmation to agencies that all lease documentation has been completed correctly and acts as an assurance that the agencies interests have been protected.
  • A solicitor’s certificate should contain the date; type of legal document (eg deed of lease); name of the parties; name of the premises; physical address of the premises; legal description of the land; a statement from the solicitor confirming that they prepared the document and that it is in order for the agency to execute; and the signature of the solicitor who prepared the documentation.
  • The appropriate government standard development agreement template should be used as a base document by agencies where a landlord is required to complete fit-out works prior to the lease being executed.
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