Real Estate 2025 Comparisons

As with other commonwealth jurisdictions, New Zealand (NZ) real estate law is governed by both common law and statutes. NZ has adopted the Torrens title system, the main principle of which is that title is guaranteed by the NZ government so there is no need to establish “chain of title”. As NZ does not operate a federal system, transfers of land interests are relatively simple and straightforward, and are overseen by a single government entity: Land Information New Zealand (LINZ).

NZ has codified large sections of real estate law in the form of the Property Law Act 2007 (PLA) and the Land Transfer Act 2017. NZ has also developed its own body of common law, but courts will often refer to decisions from other commonwealth jurisdictions with similar legal systems, such as Australia, the United Kingdom and Canada.

The NZ commercial property market experienced an array of challenges due to high interest rates and economic uncertainties, leading to a decrease in commercial property sales and reduced leasing activity in 2024. The year 2025 is showing signs of recovery due to a drop in interest rates and investor re-engagement.

Yield movements are poised to positively influence investment returns with rents expected to contribute to capital returns by 2026. Property syndication has slowed down since 2024, with a number of investors waiting to see how 2025 will fare.

The residential market is showing signs of improvement after a slow year of sales in 2024. There has been an increase in sales activity and property values through 2025 likely due to lower interest rates and renewed buyer confidence.

Recent significant deals in 2024 and 2025 include:

• the sale of an industrial property located at 38-44 Dalgety Drive, Wiri, Auckland to ESR Australia and New Zealand (a property fund) for NZD120 million, making it one of 2025’s largest deals;
• the sale of 32 iPort Drive, Rolleston (a logistics facility) in Christchurch to Booster KiwiSaver for NZD63.5 million – this was one of the largest industrial property transactions ever recorded in the South Island; and
• the upcoming sale of the Manukau Supa Centa, Auckland to Property Income Fund (Willis Bond) for NZD161 million.

The government has recently announced that it intends to make material changes to the Overseas Investment Act 2005 that aim to give more confidence to overseas investors. The government intends to shift the overarching purpose of the Overseas Investment Act to emphasise the economic benefit that comes with overseas investment, as opposed to the current focus which views foreign ownership of sensitive assets as being a “privilege”. The government has also issued a directive for decisions on consent for all investments (excluding residential land, farmland and fishing quota) to be made within 15 days. The reform will also seek to introduce a new modified national interest test for investments other than residential land, farmland and fishing quota investments. These proposed changes all aim to help simplify and streamline the process while providing overseas investors with greater clarity and confidence.

The government is changing the planning legislation with a range of new national direction and a new Resource Management Act due to be in place by the end of 2026. The signalled policy direction includes better provision for infrastructure, a potential reduction in amenity related controls on developments, an easing of environmental limits for certain income generating industries, and more co-ordinated and consistent rules across different locations. The timeframe for transition to full implementation of these changes is likely to be 3–5 years.

The government has recently announced a new tax deduction available for all businesses known as “Investment Boost”. Investment Boost is available from 22 May 2025, allowing businesses to claim 20% of the cost of new qualifying assets as an expense, then claim depreciation as usual on the remaining 80% – this is particularly beneficial to property owners and developers as Investment Boost will allow businesses to claim the deduction for the construction or purchase of commercial and industrial buildings as well as capital improvements to existing buildings (ie, the cost of seismic strengthening works).

The most common property rights are as follows:

• freehold – the highest form of ownership in NZ, which confers freehold ownership of the land, the airspace above and the ground below;
• leasehold – land is leased from a freehold owner or higher ranking leasehold owner, and exclusive possession is conferred for the term of the lease;
• stratum/unit title – a freehold or leasehold estate with three-dimensional boundaries (meaning the land is limited in height and/or depth), which is usually used for apartment/high-rise developments; and
• composite/cross lease – a combination of freehold and leasehold estates comprised in one record of title.

Other rights in land that are commonly granted are set out in 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time.

The transfer of title is principally governed by the Land Transfer Act 2017. Save for fraudulent transactions, upon registration of a transfer of title, the new registered owner’s ownership is indefeasible to other competing, non-registered interests.

All transferees and transferors of titles are required to disclose tax identification numbers to LINZ, which allows the Inland Revenue Department to track ownership changes and tax liability.

There are no specific laws relating to the transfer of any particular type of commercial real estate, although there are established norms and procedures that are followed.

The transfer of title is usually effected by the solicitors acting for the transferee and the transferor registering an electronic transfer instrument with LINZ, which (in most cases) is instantaneously registered.

All transfers are registered on the property’s record of title; a historical version of the record of title, showing every transfer ever recorded by LINZ, can be searched online by the public for a small fee.

Title insurance is used only rarely due to the guaranteed title system, which produces title searches instantaneously. LINZ also issues guaranteed records of title, which allow a purchaser to bring a proceeding in court against the Crown to seek compensation under the Land Transfer Act 2017 if that purchaser suffers loss or damage as a result of an undisclosed interest being registered against the record of title during a certain period following the transaction, provided the purchaser obtains a guaranteed record of title within statutory time periods.

Due diligence will usually involve reviewing the following:

• record(s) of title and registered interests;
• leases, licences or other unregistered interests;
• relevant planning and zoning rules; and
• land information memorandum prepared by the local authority to identify:
1. contamination;
2. building issues;
3. enforcement action;
4. building and resource consents; and
5. other records, particularly in relation to utilities, ground conditions, environmental features, etc.

Purchasers often also undertake on-site inspections and tests, including building and geotechnical reports, seismic assessments, asbestos assessments, methamphetamine drug contamination/toxicology reports, and obtaining valuations.

Most real estate transactions use a standard form sale-and-purchase agreement, particularly in the residential sector. Commercial contracts will usually contain negotiated terms that are specific to the nature and use of the real estate.

Typical representations and warranties include the following:

• that the real estate and chattels will be unencumbered on completion;
• that certain chattels and the systems that provide basic services to the property (such as air conditioning, heating, cooling and security) are in reasonable working order;
• that certain chattels are in the same state of repair as at the date of the agreement;
• that no notices have been received from any local or central authority that affect the property;
• that the vendor has no knowledge or notice of any fact that might result in any legal proceedings being instituted by or against the vendor or purchaser in respect of the property;
• that there are no defaults under any lease;
• that the property will be vacant (where the property is sold with vacant possession);
• that there are no arrears of rates/taxes; and
• that all works undertaken by the vendor during the course of the vendor’s ownership of the property have all necessary consents.

Generally, aside from the warranties set out in the sale and purchase agreement, “caveat emptor” applies to most real estate transactions. However, there are also certain statutory requirements that vendors cannot contract out of.

Typically, warranty breaches or misrepresentations only give rise to claims for compensation and equitable set-off, which – if discovered and notified to the vendor pre-settlement – will usually result in a reduction in the amount paid by the purchaser on settlement. The suffering party will not be able to cancel the contract as a result of a misrepresentation, unless the misrepresentation relates to an essential term of the agreement or substantially impacts the benefit or burden of the agreement.

Tax Law

An investor should solicit tax advice from an accountant before buying real estate to ensure that it structures its purchase, ownership and use of the property in the most advantageous way, and avoids unexpected tax liability.

Overseas Investment Law

A foreign investor needs to obtain legal advice regarding whether it requires consent for its purchase under the Overseas Investment Act 2005.

Resource Management Law

An investor needs to consider whether it will need, and be able to obtain, any consents or licences from relevant authorities for its specific use of a property. Also, there may be compliance requirements relating to contamination.

Building Standards

An investor needs to consider whether a building complies with the Building Act 2004. Commercial buildings and some residential and other buildings may require mandatory earthquake-strengthening under recent changes to the Building Act 2004, which can be costly, time-consuming and disruptive to tenants.

Property Law

An investor needs to ensure that their acquisition complies with NZ’s laws relating to real estate acquisitions.

The buyer of a real estate asset may be responsible for soil pollution or environmental contamination of a property even if they did not cause the pollution or contamination. Buyers should review the lists of actual and potentially contaminated sites (known as HAIL) administered by regional councils for each region.

Buyers should review the district plans prepared by city or district councils and the regional plans and regional coastal plans prepared by regional councils to ascertain the permitted uses of a property.

Development agreements can be entered into with public authorities in relation to a specific development for infrastructure provision and associated costs.

Governmental taking of land, condemnation, expropriation or compulsory purchase are possible under the Public Works Act 1981 (PWA), which gives central government and local authorities (Acquiring Authorities) the statutory authority to acquire private land for public works.

The Acquiring Authority may negotiate with private landowners to purchase the land and is required to pay compensation to the private landowner, which, together with the other terms of sale, will be negotiated between the parties. If the value of compensation cannot be agreed, the amount of compensation payable may be determined by the Land Valuation Tribunal. Following the compensation and other terms of sale being agreed, a formal agreement is signed by the parties and the land is transferred to the Acquiring Authority.

Where an agreement cannot be reached, the Acquiring Authority may compulsorily acquire the land. Every person that has any estate or interest in the land may object by appealing to the Environment Court. However, the right to object to compulsory acquisition only applies to the land being taken, not the amount of compensation.

The PWA is in the process of being reformed, with significant proposed amendments that are aimed to simplify regulations, improve the acquisition process, and create new incentives for landowners to encourage engagement in the acquisition process. As part of the proposed amendments, Parliament has recently introduced the Public Works (Critical Infrastructure) Amendment Bill, which is intended to streamline the land acquisition process for certain critical infrastructure projects in NZ.

See 8.1 VAT and Sales Tax, 8.2 Mitigation of Tax Liability and 8.4 Income Tax Withholding for Foreign Investors regarding taxation on real estate transfers.

The buyer and seller usually pay their own transaction costs, although, in larger deals involving a significant amount of pre-contract due diligence, a seller may offer to pay all or some of a buyer’s due diligence costs if the transaction does not proceed.

The Overseas Investment Act 2005 (OIA) and Overseas Investment Regulations 2005 restrict “overseas persons” from acquiring certain real estate in NZ without consent. This land includes:

• all land that has a property category of “residential” or “lifestyle” (as assessed by the local/territorial authority) – noting that there are limited exemptions for Australian and Singaporean purchasers;
• rural land over five hectares;
• the foreshore or seabed; and
• various other classes of land, including in some instances land that adjoins “sensitive land”.

OIA consent is also required for a foreign investor to acquire an interest in residential land with a potential term of three years of more or an interest in land that is sensitive (but not residential) with a potential term of ten years or more – such as a lease or option. Certain interests, such as easements, are exempt.

In addition, the Minister of Finance has powers to assess whether a potential overseas investment will be contrary to NZ’s national interest under a national interest assessment – this assessment is mandatory for certain overseas investments that relate to strategically important businesses (such as businesses involved in military equipment, ports, airports, telecommunication providers, media business, etc) or where the investment may post a risk to national security/public order, could give disproportionate access or control to a foreign government, could give significant market power to an overseas person, or otherwise is inconsistent with government objectives.

Acquisitions of commercial real estate are generally financed in the loan market, using either bilateral secured loans or, for larger transactions, syndicated secured loans.

The largest providers of commercial real estate finance are the main Australian trading banks or their NZ subsidiaries. Other foreign banks and domestic and foreign credit funds are increasingly active participants in the market.

The larger institutional holders of real estate also access domestic and international capital markets to fund their acquisitions.

The sorts of security typically created or entered into by a commercial real estate investor who is borrowing funds to acquire or develop real estate are as follows:

• a registered mortgage over the record of title for the real estate asset, which will be registered on title; and/or
• all-assets security, which will be given under a general security agreement over all the real and personal property of the borrower – to the extent the security is over personal property, it will be registered on NZ’s online Personal Property Securities Register.

If the borrower is a special-purpose vehicle, the financier may also look to take specific security over the shares of the borrower.

A foreign lender taking security over real estate that is classified as “sensitive land” under the OIA will be subject to the consent regime set out in that Act. However, the OIA provides for an exception from this regime (applicable to most ordinary-course secured lending arrangements).

Nominal registration fees apply to registrations of mortgages on title and on the Personal Property Securities Register. There are no taxes or stamp duties payable in respect of the granting or enforcement of security.

NZ has a “financial assistance” regime under the Companies Act 1993, which provides that a company may give financial assistance to a person for the purpose of, or in connection with, the purchase of a share issued or to be issued by the company or by its holding company (whether directly or indirectly) if the following occurs before the financial assistance is given:

• the company’s directors sign a certificate as to the solvency of the company (on both a balance sheet and a liquidity basis) immediately after the giving of the financial assistance; and
• the financial assistance is approved by all shareholders of the company.

Under the Companies Act, directors of a company must, among other things, act in good faith, in what they believe to be the best interests of the company, and for a proper purpose. The Companies Act also permits directors to act in what they believe to be the best interests of the company’s holding company (even though it may not be in the best interests of the company), provided that this is expressly permitted in the company’s constitution and (where the company is not wholly owned by the holding company) that it is done with the prior agreement of the company’s shareholders other than the holding company.

There are formalities to be met before a lender is able to enforce its registered mortgage over real estate against the defaulting borrower under the PLA.

It is common for a lender wishing to enforce following a default to appoint a receiver, who will control the real estate with a view to realisation; other than entering into a deed of appointment with the receiver, no particular formalities are required of the lender.

In realising an asset under a security, the security holder or its receiver owes certain persons (including the grantor, any guarantors and certain other creditors of the grantor) a duty (of “reasonable care” in the case of the security holder) to obtain the best price reasonably obtainable at the time of sale.

A lender may agree for an existing secured debt owed to it to be subordinated to any other debt. This is achieved by way of a subordination deed. The contractual subordination of security is usually registered by way of priority instrument on title (for mortgages) or on the Personal Property Securities Register (for general/specific security interests over personal property).

A lender holding security should not become personally liable under environmental laws, as long as said lender does not enter into possession of the relevant real estate.

Validly created security interests granted by a borrower in favour of a lender will continue to be effective if the borrower becomes insolvent or enters into voluntary administration or liquidation.

However, if a company is unable to pay its due debts immediately after a security interest was granted by the company, and the charge was given within the two years prior to the commencement of the borrower’s liquidation, there is a risk that the security may be voidable by the liquidator in certain circumstances.

There are no such rules, regulations or requirements at the time of writing, with respect to taxes on loans in New Zealand.

The legal and regulatory framework supporting the resource management system is a combination of the following:

• legislation, regulations, national policy statements and national environmental standards enacted and approved by central government;
• regional policy statements, regional coastal plans and regional plans adopted by regional councils and unitary authorities; and
• district plans put in place by city and district councils and unitary authorities.

The exterior design, appearance and method of construction or refurbishment are regulated through the applicable district plan and the Building Act 2004 (together with the Building Code). The Building Act 2004 and the Building Code regulate internal design, building materials as fit for purpose, and construction methodologies. Prior to commencing construction, a building consent must be obtained from the local authority. The local authority will monitor construction and, following completion, certify that it has been constructed in accordance with the Building Code and the relevant building consent.

A district plan may impose rules in relation to matters such as location and density of buildings, height, design, etc, though the level of regulation is variable across locations and districts. Rules associated with specific zone may also regulate the ultimate use of a building – eg, no residential building in an industrial zone. Resource consent may be required where a new building or refurbishment breaches one or more of these rules.

Land use and development usually fall within local government control, although larger developments which might be nationally significant can be “called in” to a Board of Inquiry administered by the Environmental Protection Authority; or referred directly to the Environment Court in certain circumstances. Some developments may be provided for in fast track legislation, which prescribes a more concise process for enabling development usually with more certain outcomes.

The primary legislation regulating development is the Resource Management Act 1991 (RMA), which is administered by local authorities, and establishes a hierarchy of national and regional policy statements and regional and district plans that give substance to the sustainable management purpose of the RMA, with increasing particularity regarding content and locality.

While the rules vary between regions and between districts, the overall framework of regulations is similar. Land use is controlled by the division of land into zones, which indicate the type of development anticipated for that land, and identify overlays and special features (such as heritage items). Plan rules identify whether resource consent is required to undertake specific activities within a zone or overlay or in the location of a special feature.

The RMA legislation is due to be replaced by the end of 2026. Refer to 1.3 Proposals for Reform.

New projects or refurbishments will usually require resource consent. There are different classes of resource consent, some are very straightforward to obtain (eg, controlled activity) and only include limited controls on development, while others are considerably more complex and will potentially require a range of expert input on environmental matters relevant to the particular development (eg, non-complying activity). The rules in a district or regional plan will dictate what type of consent is required for different developments.

Resource consent applications are processed through a number of stages, including requests for further information, making a decision on public notification, receiving public submissions (if notified), holding a public hearing before a commissioner (unless non-notified and decided on the papers), and issuing a decision.

The RMA sets out a process for determining whether applications are non-notified (no ability for third parties to submit or appeal), limited notified (certain “affected parties” are given the opportunity to submit) or publicly notified (anyone can make a submission). Non-notified consents are the most straightforward to obtain.

The Council will charge processing fees for resource consents, with higher fees likely for the more complex consent processes.

There is a right of appeal against a local authority’s decision on a consent or the carrying on of a designated use (usually infrastructure), but only for the applicant and any person who made a submission on a consent application.

There is also a right of objection against certain other decisions, including relating to fees and some development servicing decisions.

Councils usually impose detailed conditions relating to the undertaking of a development; therefore, separate development agreements are only usually required for large projects that require large amounts of new infrastructure. The form of these agreements varies between the different councils and utility suppliers, and can include infrastructure cost-sharing and the transfer of development rights. Under recently introduced legislation, some councils are now creating external water services providers who may need to be contracted with for water servicing in the future.

The RMA establishes several enforcement options.

• Enforcement order – an order sought in the Environment Court by a council or third party to compel a person to comply with provisions of the RMA, planning rules or the conditions of a resource consent.
• Abatement notice – enforcement officers, appointed by local authorities, may serve abatement notices to require a person to comply with the provisions of the RMA.
• Criminal prosecution – the RMA includes a range of offences for contravening duties and restrictions in the RMA (including breaches of planning rules and resource consents).
• Infringement notices – as an alternative to criminal proceedings, a council may serve an infringement notice where certain RMA contraventions have been committed. Infringement notice fines usually range from NZD300 to NZD750 per infringement.

Enforcement steps like these are most commonly preceded by direct engagement and discussions with the local authority.

Common entities include the following:

• limited liability companies incorporated in NZ;
• companies incorporated outside of NZ and registered in NZ;
• limited partnerships;
• trusts (including real estate investment trusts/listed property trusts); and
• property syndicates.

NZ Incorporated Companies

NZ companies can choose whether or not to adopt a constitution (which, if adopted, is required to be made publicly available). The constitution and shareholder agreement (if applicable) typically set out the mechanics relating to the issue and transfer of shares, the relationship between shareholders and the company, the management of the company by the directors, etc. If no constitution is adopted, the default provisions of the Companies Act 1993 will apply.

Companies Incorporated Outside of NZ and Registered in NZ

The Companies Act does not apply generally to overseas companies, but only where it refers specifically to “an overseas company”. As such, the constitution of an overseas company will usually reflect the position taken in its home jurisdiction.

Limited Partnerships

NZ limited partnerships have their own separate legal personality and are governed by the Limited Partnerships Act 2008. Limited partnerships are a form of partnership involving general partners (who manage the partnership and are, together with the partnership itself, liable for the debts and liabilities of the partnership) and limited partners (who do not take part in the management of the partnership but are liable to the extent of their capital contribution to the partnership). Every limited partnership must have a written partnership agreement (containing certain specific matters prescribed by legislation) – this establishes the limited partnership and governs the partnership. The partnership agreement will cover matters such as any restrictions on disposal or assignment, the scope of the business of the partnership, the entitlement of partners to distributions and whether a general partner is permitted to compete with the partnership.

Trusts

A trust is an entity established by a person (the settlor) to transfer legal ownership of assets, including real estate, to other persons (the trustees) to hold the assets on trust for the benefit of persons selected by the settlor (the beneficiaries). Trusts are not publicly registered entities, except for registered charitable trusts. There are various types of trusts, including the following:

• family trusts;
• business or investment trusts;
• charitable trusts; and
• testamentary trusts.

Trusts are governed by the terms of the trust deed that establishes the trust and by the Trusts Act 2019, which came into effect on 30 January 2021. Much of the Trusts Act 2019 restates and codifies existing statute and case law, although there are a number of new obligations on trustees, particularly with respect to record keeping and the presumption that trust information is disclosed to the trust’s beneficiaries.

Real Estate Investment Trusts/Listed Property Trusts

There are approximately nine listed property trusts (LPTs) in NZ, each specialising in different sectors. LPTs are publicly traded on the NZ Stock Exchange and are regulated in a similar manner to listed companies. Shares in LPTs can be bought and sold relatively easily, and the entry level price point is relatively low (NZD5,000). LPTs give investors the opportunity to invest in property without having to invest a substantial amount of capital.

Property Syndicates

Investors can also invest in property syndicates, which are proportionate ownership schemes usually involving the purchase of a single property. The minimum investment is usually around NZD50,000 and, in return, the investor is entitled to a share of the returns generated from the property. The property is normally managed by a professional management company and generates higher returns than other real estate investments, due to the higher level of risk involved (single investment, higher gearing, difficulties of selling, etc). A syndicate will usually be set up as a company, with the shares in that company being held on trust for the investors.

Refer to 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity.

Other than the legal and/or administrative costs involved with establishing an entity and their governing documents (if required), there are generally no minimum capital requirements in order to establish real estate investment entities, noting that:

• in order to establish a trust, there must be capital settled into the trust (but this can be a nominal amount); and
• a company must not trade where it is insolvent.

NZ Companies

NZ incorporated companies must have a physical address in NZ and at least one director who lives in NZ, or lives in Australia and is a director of a company incorporated in Australia.

The business and affairs of the company must be managed by the board of the company, or under its direction or supervision. However, there are certain matters that require the approval of shareholders by a majority of 75% of the votes of those shareholders entitled to vote. The directors of the company are also required to comply with certain directors’ duties.

Companies that are listed on the NZ Stock Exchange and listed property trusts will be subject to the relevant governance requirements contained in the listing rules.

Overseas Companies Registered in NZ

Overseas companies that are carrying on business in NZ must be registered on the Companies Office register.

An application to register an overseas company in NZ must include a physical address of the company’s place of business in NZ, and the details of one or more persons resident or incorporated in NZ who are authorised to accept service in NZ of documents on behalf of the overseas company.

Only certain requirements of the Companies Act apply to overseas companies.

Limited Partnerships

A person may not be both a general partner and a limited partner of the same limited partnership. Limited partners are prohibited from taking part in the management of the partnership; however, there are certain “safe harbour activities”.

Every limited partnership must have a partnership agreement.

Trusts

There are wide-ranging duties on trustees. The Trusts Act 2019 sets out a number of mandatory duties that apply to all trustees, and default duties, which may be contracted out of or modified in the trust deed. In general terms, trustees must act in good faith for the benefit of the beneficiaries and in accordance with the terms of the trust.

The administration of charitable trusts is governed by the Charitable Trusts Act 1957, and all charitable trusts must be registered on the charities register.

NZ Incorporated Companies

The costs associated with the operation of a company will be determined by a number of factors, such as the size of the business, the nature of the real estate it owns and the complexity of its business operations. All companies will have to file an annual return each year. NZ incorporated companies are generally relatively easy to establish and maintain, and costs are usually not significant.

Overseas Companies Registered in NZ

Overseas companies are required to complete an online annual return, and may be required to prepare, audit and file (publicly) their financial statements, depending on the scale of the business. As such, maintenance and accounting compliance costs are minimal.

Limited Partnerships

The ongoing maintenance and accounting compliance requirements are similar to those of NZ incorporated companies.

Trusts

The trustees are required to file an annual income tax return, and to prepare financial accounts where required if the trust earns income. As such, maintenance and accounting compliance requirements are likely to be nominal.

The types of arrangements recognised by law whereby a person, company or other organisation can occupy and use real estate for a limited period of time, without buying it outright, are as follows.

• Lease – this is considered to be the most preferable property right short of a freehold/fee simple interest, given that one of its main features is a right to exclusive possession of the relevant land.
• Licence – a licence is a contractual right only (ie, it does not confer equitable rights) to occupy or use a property, and cannot confer exclusive possession (otherwise it may be held to be a lease) and is therefore usually a right to use a property in common with others (eg, the landlord/fee simple owner and their invitees).
• Easements – an easement is a right to use a third party’s land on a non-exclusive basis or a right to restrict a landowner from using their land, in a particular way. NZ law only recognises certain types of easements.
• Profits à prendre – a profit à prendre (profit) confers a right on a party to take things naturally occurring on the land, such as timber, soil or minerals.

The most commonly used form of lease is The Law Association of NZ (previously known as the Auckland District Law Society) form.

The Property Council of NZ also produces specific leases for office, retail and industrial premises.

It is not uncommon for large landlords or tenants to develop their own form of lease, usually based on these lease forms.

Rents and lease terms are freely negotiable.

The term of a lease usually depends on the size of the premises let. Smaller tenancies typically have terms of less than five years, with one or two rights of renewal of similar terms. Larger tenancies typically have terms for longer periods and more frequent renewals of longer periods.

Day-to-day repair and maintenance of the premises is usually the responsibility of the tenant, while landlords are usually responsible for structural maintenance and keeping the building weatherproof.

Rent is typically paid on a monthly basis.

Many leases contain a provision entitling a tenant to a fair abatement of rent if they are unable to access the premises; however, a large number of leases are silent on this point or only allow such abatement if the landlord’s insurance covers the situation (which is not usually the case for a pandemic).

Rent will typically be subject to rent reviews during the term of a lease.

The most common way of reviewing the rent is through one or a combination of the following methods:

• adjusting the rent by reference to changes to the Consumer Price Index (or a similar index that measures inflation);
• increasing the rent by a fixed percentage annually; or
• adjusting the rent to reflect the market rent.

For index-based or fixed rent increases, the rent is typically calculated by the landlord, and the tenant is then notified of the new rent.

For market rent reviews, usually either party may initiate the review by notifying the other party of its proposed market rent. If the party receiving a market rent review notice disputes the proposed rent and the parties are not able to reach agreement, the rent is usually determined by registered valuer(s) or arbitration.

NZ’s VAT equivalent (Goods and Services Tax – GST) is payable on rent and any other payments made by a tenant under a lease.

A tenant is typically required to pay a deposit of one or two months’ rent as advance rent on signing an agreement to lease.

Each party usually pays its own legal costs of negotiating the lease.

Each tenant is commonly required to pay for a proportion of the maintenance and repair of common areas.

It is not unusual for each tenancy within a property to have a separate meter for various utilities, meaning that costs can be directly attributed to a particular tenancy. Where there are not separate meters or this is impractical, each tenant is usually required to pay the landlord a proportion of the total costs.

NZ does not have a specific real estate tax. The closest equivalent would be local council “rates” which are annual fees charged by the council on property to fund community infrastructure and services. The tenant typically reimburses the landlord for the rates.

The tenant typically pays the costs of the landlord’s insurance.

The policy usually covers events that cause damage and destruction to the building(s) by fire, flood, explosion, lightning, storm, earthquake and volcanic activity on a full replacement and reinstatement basis or indemnity to full insurable value. Landlords will often also obtain insurance for loss of rents for set periods (eg, 12 months).

Leases usually contain restrictions on the tenant’s use of the real estate.

Various laws and/or regulations will also apply, depending on the use (eg, the sale of alcohol requires permits to be obtained).

The tenant is usually permitted to alter or improve the demised premises with the prior written consent of the landlord. The tenant is usually required to produce plans and specifications for the proposed alterations, to be reviewed and approved by the landlord. When undergoing building work, the tenant may also be required to obtain a building consent and code compliance certificate pursuant to the Building Act 2004. The tenant is also typically required to provide copies of the building consent and code compliance certificates to the landlord.

Landlords of residential tenancies must comply with a number of specific laws and regulations, including:

• the Residential Tenancies Act 1986 (as amended by the Residential Tenancies Amendment Act 2019) (RTA);
• the Residential Tenancies (Healthy Homes Standards) Regulations 2019 (Healthy Homes); and
• the Residential Tenancies (Smoke Alarms and Insulation) Regulations 2016 (RTSAI Regulations).

All residential tenancies are governed by the RTA, which outlines the rights and obligations of a landlord and tenant. It also requires a landlord and tenant to enter into a written tenancy agreement, which outlines the terms and conditions of the tenancy. The Healthy Homes standards outline the minimum requirements of a residential tenancy to ensure that landlords let properties that are in a habitable state to tenants. The RTSAI Regulations require landlords to ensure that residential tenancies are warm, dry and safe.

There are no specific regulations and/or laws that apply to leases for the particular real estate categories of industrial, offices, retail or hotels; all commercial leases are governed by the PLA.

Parties must also comply with obligations under the Health and Safety Work Act 2015 and other approved standards in relation to any commercial premises.

Leases commonly provide that the lease is immediately terminable upon the event of a tenant’s insolvency; however, there is no statutory legislation deeming this to be the case. Where a tenant is insolvent, they may be able to disclaim a lease, depending on the winding-up process adopted (effectively bringing it to an end).

The PLA implies in every lease that if the landlord permits the tenant to remain in occupation of the premises after the expiry or earlier termination of the lease, the occupation is deemed a periodic tenancy on the same terms as the lease. It may be terminated by either party giving written notice (often 20 working days).

A landlord should clearly communicate with the tenant to ensure that they leave on the expiry date of the lease. If necessary, the landlord may need to serve formal notice of the expiry date. Following the expiry date, the landlord is entitled to enter the premises and change the locks if need be.

A tenant is typically permitted to assign or sub-lease (in whole or in part) their leasehold interest to a third party, if they obtain the landlord’s prior consent in writing and satisfy a number of standard conditions, including the following:

• the tenant can prove that the proposed assignee is respectable and responsible, and has the financial resources to meet the tenant’s commitments under the lease;
• all rent and other moneys due under the lease are paid;
• the assignee signs a deed of covenant in favour of the landlord;
• appropriate guarantees are provided by the assignee; and
• the tenant pays the landlord’s costs.

Where a tenant is a company (which is not listed on the main board of a public stock exchange in NZ or Australia), it is also standard for a lease to provide that any change to the shareholding that results in a change in the effective management or control of the company will require the prior written consent of the landlord.

The following events typically give the landlord and the tenant a right to terminate the lease (under general contract terms and any applicable legislation).

• Where the tenant is in default under the lease and fails to remedy the default after receiving notice from the landlord to do so. The most common reason for default is the tenant’s failure to pay rent or outgoings.
• Where the premises are totally destroyed or so damaged that they are untenantable or require demolition or reconstruction. If the premises are only partially destroyed, a lease may also be terminated where the landlord cannot obtain a permit or consent to repair the damage to the premises, or where the insurance moneys received for the damage are inadequate to repair or reinstate the premises.
• If the tenant is unable to access the premises for a specified period (usually nine months) or if it can be established with reasonable certainty that access will not be able to be granted during the specified period.

Leases are not required to be registered on the record of title in order to be valid or legally binding. It is recommended that a lease should be signed as a deed to ensure certainty around enforceability. Leases are not typically registered due to the costs involved in undertaking a survey of the premises.

A tenant may be forced to leave the premises if they are in default of the lease terms. The PLA sets out the minimum legal process that must be followed before a commercial tenant can be evicted and the lease formally terminated. Commercial parties may agree more favourable terms, but if the terms are less favourable than the PLA, then the PLA will be applied instead.

The PLA requires that notice must first be served on a tenant, setting out the essential details concerning the default, including the nature of the breach, the remedy required and the tenant’s rights. It must be properly served in accordance with the requirements of the PLA.

The period to remedy the breach must not be less than ten working days in the case of failure to pay rent (rent must be in arrears by at least ten days in order to serve notice), or a timeframe that is reasonable in the circumstances for a breach of any other covenant. Tenants may apply to the courts for relief against termination of a lease and are often successful if there is no detriment to the landlord.

An authority may acquire a leasehold estate pursuant to the PWA. The relevant authority must comply with the procedures in the PWA. It may acquire the leasehold estate by negotiation or compulsorily. The timeframe involved will depend on the length of negotiations with the landlord and tenant. Compensation is payable by the relevant authority, and is not limited to the value of the land taken. Compensation may also be paid for permanent depreciation in the value of any retained land (injurious affection), damage to any land or disturbance resulting from the acquisition, including business loss resulting from relocation.

In NZ, there is no statutory cap on damages that can be recovered from a commercial lease, so long as the landlord has taken reasonable steps to mitigate their losses. Damages can include loss of rent until the premises are re-let, reinstatement or “make-good” costs for the premises and associated costs such as legal fees, enforcement costs and agent fees.

The most common form of security for a commercial lease is a bank guarantee from a registered bank (usually a NZ bank). Landlords also commonly accept parent company guarantee or director/shareholder guarantees, or a cash bond.

Under the RTA, residential landlords can require a cash bond of up to four weeks’ rent, which is held by the independent body Tenancy Services.

The most common structures used to price construction projects are as follows.

• Lump-sum contracts, which involve a fixed price for a defined scope of work. However, the price can change if the owner alters the design/works, or if unexpected circumstances are encountered.
• Measure and value contracts, whereby a schedule of prices is usually agreed at the outset (eg, a rate per unit of work), and the quantity of work is then measured/assessed and paid accordingly.
• Cost-reimbursement contracts, whereby the owner pays the contractor its net costs plus a pre-agreed margin. This is less common than the above options, due to the lack of cost certainty/control.

Also, alliances and other forms of collaborative contracting are increasingly used on major projects.

There are two main categories of construction contract and design risk allocation in NZ.

• Construct only – the contractor is responsible for its methodology of construction based on the design, but not for errors or omissions in that design. Between the contractor and the owner, the design risk sits with the owner. Typically, the owner separately allocates the design risk by contract to an architect and/or engineer.
• Design and construct – the contractor is responsible for both the design and the construction of the works (if the owner has a pre-existing design, it may be novated to the contractor).

Engineering, procurement and construction management arrangements where the head contractor project manages a set of specialist contractors and consultants are less common in NZ. Alliancing contracts that share the risks of design and construction are usually limited to larger projects where there is a high degree of uncertainty and risk.

Cost overruns are one of the most significant risks on a construction project. These are largely managed/allocated by whether or not the contract allows the contractor to claim a variation if stated risks occur.

Cross-indemnities are commonly given for key risks that are within a party’s control, such as:

• damage to property (usually insurable);
• injury to persons (limited by the Accident Compensation Act 2001 and the Health and Safety at Work Act 2015); and
• infringement of intellectual property.

The owner is also usually indemnified for the cost of completing or remedying defects in the works if the contractor defaults. Indemnities and insurance for statutory fines or infringement fees are unlawful and accordingly should be limited “to the extent permitted by law”.

Each side usually gives a wide range of contractual warranties. The owner usually warrants that it has made the contractor aware of all pertinent information, while the contractor provides a range of warranties relating to its performance and the quality of the works. Owners often also require additional warranties from contractors and subcontractors.

Some warranties are incorporated into particular contracts (eg, consumer contracts) by statute, including:

• the Building Act 2004 – implies that building work for household units will be carried out properly and competently;
• the Consumer Guarantees Act 1993 – requires services for consumers (eg, by tradespeople) to be performed with reasonable care and skill; and
• the Fair Trading Act 1986 – provides that representations and conduct must not be misleading.

Parties commonly exclude liability for loss of profits, loss of revenue, loss of goodwill, and indirect or consequential losses. However, an exclusion of liability is not included by default in most construction contracts.

Contractors and Consultants sometimes seek a cap on liability under the contract and this is an option in some of the NZ standard contracts. Consultants almost universally cap liability at or below the level of their professional indemnity insurance.

The law prohibits the limitation or exclusion of some forms of liability – eg, statutory penalties, or losses arising from fraud or criminal conduct.

The Limitation Act 2010 and the Building Act 2004 together provide contractors with a defence to civil proceedings if too much time has passed between a claim arising and the claim being brought.

Where there are multiple parties who have caused the same loss, the general rule in NZ is that each party can be liable for the whole of the loss. The owner does not have to apportion that loss among the wrongdoers, unless the contract provides otherwise.

The contractor is usually required to complete the works within a stated number of working days. Contracts usually allow for that period to be extended if certain events occur. The prevention principle also operates to replace a stated period with a reasonable time period if delays are caused by an act or omission of the owner and the contract does not provide for an extension of time.

If the contractor does not complete the works within the applicable period, then the owner could be entitled to damages for losses caused by that delay. Delay-liquidated damages are commonly specified in the contract, and these liquidated damages are enforceable to the extent that they do not amount to a penalty. The NZ test is whether the liquidated damages are “out of all proportion” to a party’s legitimate commercial interests, which is a high bar.

It is common for owners to require some form of security from contractors, such as bonds, retentions and guarantees.

In limited circumstances, a contractor may be able to retain materials in its possession under a lien. However, to prevent payment disputes from delaying projects, commercial contracts typically preclude a contractor or designer from exercising any right of lien or otherwise encumbering project materials.

Contractors can more effectively protect their security interests in materials by registering financing statements on the Personal Property Security Register. Owners can discharge or change incorrectly registered financing statements by following the change-demand process in the Personal Property Securities Act 1999.

To comply with the Building Act 2004, owners need to obtain a code-compliance certificate from the appropriate territorial authority. This is required before the public occupation, or sale, of the building. In some instances, an owner can obtain a certificate for public use to allow public access to the premises before a code compliance certificate is granted.

Owners of buildings with particular systems (eg, sprinklers, fire alarms, and lifts) also need to have a compliance schedule and file an annual building warrant of fitness to confirm that the specified systems are maintained and operating effectively.

Value added tax in NZ is known as goods and services tax (or GST) and is levied under the Goods and Services Tax Act 1985. The standard rate for GST is 15% of the acquisition price. Real estate transactions in NZ are subject to the GST regime, however, there is a compulsory zero rating regime applicable to most commercial real estate transactions where GST is charged at zero per cent provided certain criteria are met (both parties are registered for GST, the property is acquired with the intention of using it for taxable supplies and the land is not intended to be a principal place of residence of the purchaser). Where GST is payable, this is paid by the vendor but would usually be charged to the purchaser as an addition to the purchase price.

No transfer or recordation tax or stamp duty is payable on real estate transactions in NZ, aside from nominal LINZ registration fees, so this is not an issue.

Local councils in all areas of NZ charge annual rates on land within their respective jurisdictions, which are usually assessed by reference to the value of the land. There are also additional rates charged for commercial properties and hotel operators. Rates are payable on all land, except certain land used for public, charitable or religious purposes.

While rates are the responsibility of the property owner, they are generally passed on to commercial tenants.

Where a non-NZ tax resident receives passive income (including interest, dividends or royalties) from a NZ tax resident, non-resident withholding tax (NRWT) must be deducted by the payor. The rates at which NRWT is deducted depend on the terms of any double tax agreement in place between NZ and the non-resident’s country. If there is no double tax agreement in place, then the default NRWT rates are 15% for interest and royalties and 30% for dividends.

The general position in NZ is that any income received from leasing a property to a tenant will be taxed as ordinary income of the recipient. For companies, the rental income received is added to the company’s annual tax returns.

NZ companies are subject to a flat income tax rate of 28%. Individuals are subject to marginal income tax rates, the highest of which is 39% for income over NZD180,000 per annum.

GST is also payable on non-residential rents, at a rate of 15%. This is almost always paid by the tenant to the landlord, who in turn accounts to the Inland Revenue for the GST payments received.

In general, capital gains made when disposing of property are tax-free in NZ. However, there are a number of exceptions that give rise to the taxation of capital gains, including:

• where a person buys a property with the intention of resale; or
• where a person buys and sells a residential property within two years (noting that there are exemptions, including in relation to the main family home).

In each case, any gain will be taxed at the person’s marginal tax rate.

Commercial property owners can depreciate certain fixtures, fittings and chattels but not the land and buildings themselves. Typically, in a commercial leasing scenario, as tenants own the fit-out, there is little scope for landlords to claim any depreciation.

Those losses incurred on a landlord’s residential rental properties (both in NZ and worldwide) against other sources of income are ring-fenced to the landlord’s property portfolio. The losses are not permanently lost, but are instead “quarantined” and can be carried forward and offset against any future income derived from residential rental property (noting that there are exemptions, including in relation to the main family home).

Following recent changes, the majority of interest costs incurred during the April 2024–March 2025 tax year can now be claimed as deductible (subject to specific requirements) and, from 1 April 2025 onwards, 100% of the interest costs incurred in relation to residential property can be claimed as a tax deduction (subject to specific requirements).

While there are tax benefits in terms of deductions and depreciation, the main tax benefits from owning real estate are the tax-free capital gains. Landowners also benefit from a reduction in the “bright-line” period, such that if they sell their residential property after owning it for two years, they are not required to pay tax on the profit resulting from the sale of their house. Tax deductions may be claimed for a variety of expenses incurred in connection with the generation of rental income. Such deductions include repair and maintenance costs, and interest costs on finance used.