“Public place” - When can police search your business?

Key Points

• A commercial building with multiple businesses is not typically considered a 'public place' as a whole, but parts may be accessible to the public.

• Police need a specific search warrant for each business they intend to search, not the entire building.

• They cannot search surrounding businesses without separate warrants or legal justification.

1 Why the “public place” question matters

3 Common areas versus private tenancies

• Common areas (foyer, lifts, corridors, carpark)
• If these areas are freely open to visitors they will usually be a public place. Police may enter and observe without a warrant, and may exercise any statutory powers that are triggered only by presence in a public place (for example a Misuse of Drugs Act warrant-less search of a vehicle in the underground carpark).
• If the common areas are access-controlled (security gate or swipe card) they are not a public place; officers need either the occupier’s consent, a warrant, or another warrant-less power (for instance s 8 SSA “incident to arrest”) to enter.

• Individual businesses (shops, offices, workshops)
• Even if the public may do business at the front counter, the back-of-house areas remain private. Unless the warrant’s schedule lists that tenancy—or Police obtain consent from the lawful occupier—entry for a search is unlawful.
• A broad-brush warrant such as “all units at 123 High Street” will often be unlawful for lack of particularity unless Police can show genuine evidential grounds for every unit. The Court will view such warrants through the lens of s 21 NZ Bill of Rights Act 1990 (right to be secure against unreasonable search). Any evidence obtained beyond scope risks exclusion under s 30 Evidence Act 2006.

4 What Police can do if new information emerges while executing the warrant

1. Secure the scene under s 118 SSA to prevent removal of evidence.

2. Apply for a tele-warrant (s 112 SSA) that same day, extending the authority to the newly-identified premises.

3. Seek consent from the occupier (s 92 SSA), provided the consent is informed, voluntary and recorded.

4. Rely on a warrant-less power, but only if the statutory criteria are truly met (e.g. s 20 SSA for drug offending or s 14 SSA for fresh evidence relating to a serious offence).

5 Strategic take-aways for defence counsel

• Scrutinise the warrant’s description of the premises and the executing officer’s notebook. Any step into an un-specified tenancy is prima facie unlawful.

• Examine CCTV and floor plans: they often prove that the searched space is subject to a separate lease or locked door, reinforcing the expectation of privacy.

• Invoke s 21 NZBORA and s 30 Evidence Act to seek exclusion if Police “piggy-backed” from one unit to another without fresh authority.

• Where common-area observations led to warrant-less entry, test the “public place” assumption—especially after hours or where swipe access is in place.

Detailed Explanation

Building as a 'Public Place'

Police Rights to Search

Survey Note: Comprehensive Analysis of Search and Seizure in Multi-Tenant Commercial Buildings

Legal Definitions and Context

Police Search Warrant Requirements

Practical Execution and Limitations

Comparison with Other Jurisdictions and Practical Considerations

Table: Key Legal Provisions Relevant to Search and Seizure

Conclusion

Key Citations

• Summary Offences Act 1981 Interpretation

• Search and Surveillance Act 2012 General provisions

• Search and Surveillance Act 2012 Form and content of search warrant

• Community Law Search Powers

Does the Building Operate as a 'Public Place'?

• Public or semi-public areas: Common spaces like lobbies, corridors, or shared facilities may be accessible to the public or tenants and could be considered 'public' or 'semi-public' depending on access restrictions.

• Private premises: The individual businesses operating within the building, typically leased or owned spaces, are private property under the control of their respective tenants or owners.

Police Rights to Search Surrounding Businesses

Scope of the Warrant

• Warrant for the Entire Building: If the warrant specifies the entire building (e.g., "123 Main Street") and the issuing officer was satisfied there are reasonable grounds to believe evidence of the suspected offense could be found anywhere within it, the police may technically have authority to search all areas, including the surrounding businesses. This might occur if the criminal activity (e.g., a money laundering operation) is suspected to involve multiple businesses or the building as a whole.

• Warrant for a Specific Business: If the warrant targets a particular business (e.g., "Unit 5, 123 Main Street"), the police are generally limited to searching that business’s premises unless additional justification exists to extend the search.

Reasonableness of the Search

• Relevance to the Investigation: The police should only search businesses where there is a reasonable basis to believe evidence related to the warrant’s purpose might be found. Searching an unrelated business with no connection to the suspected offense could be deemed unreasonable and potentially violate section 21 of the Bill of Rights Act. For example, if the warrant relates to drug trafficking by one business, searching an unrelated accounting firm in the same building without specific grounds could be unjustified.

• Minimizing Disruption: Under section 131 of the Search and Surveillance Act, police must take reasonable steps to avoid damage and leave the premises in a similar condition. Section 133 further requires minimizing disruption to the lawful activities of occupants, particularly third parties not involved in the suspected offense. In practice, this might involve coordinating with building management or business owners to access premises at a reasonable time.

Rights of Business Owners

Practical Considerations

• Search common areas (e.g., hallways, lobbies) under a general building warrant without issue, as these are less likely to be private.

• Require specific justification or consent to enter individual business premises if the warrant does not explicitly cover them.

• Face potential legal challenges if they overstep the warrant’s scope or disrupt unrelated businesses excessively.

Conclusion

1. The Warrant’s Specificity: If it authorizes a search of the entire building and is supported by reasonable grounds linking multiple areas to the offense, the police can search all businesses within it. If it targets a specific business, their authority is limited to that premises unless further justification arises.

2. Reasonableness: The police must have a reasonable basis for searching each business and conduct the search in a manner that respects the rights of occupants, minimizing disruption to those not involved in the suspected offense.

Introduction and Scenario Overview

Option 1: Amending or Partially Surrendering the Lease

Option 2: Subleasing the Unused Floor

Risks and Benefits: Subleasing vs Splitting into New Leases

• Cost Mitigation for Tenant: The tenant can recover some or all of the cost of the unused space by receiving rent from a subtenant. This reduces the financial burden of paying for an unused floor, while avoiding an outright breach of the lease. Essentially, it turns a liability (empty space) into a source of income or at least cost-sharing.

• Retention of Lease Control: The original lease remains in place and the tenant retains their rights to the premises. If the tenant’s circumstances change again (e.g. they decide later they need the second floor back), they could reclaim it at the end of the sublease term. The tenant is not permanently giving up the space – they maintain the head lease and can resume using the floor in future (for example, if they expand operations) once the sublease ends.

• Simpler Procedure than Rewriting Lease: Subleasing can often be accomplished relatively quickly by obtaining landlord consent and signing a sublease agreement, without the need to tear up the original lease. It avoids complex three-way negotiations between landlord, tenant, and a new tenant for a direct lease. From a documentation standpoint, it’s an addition (a sublease contract) rather than a replacement of existing contracts. This can mean lower legal costs and faster implementation.

• Landlord Continues to Have Primary Tenant Liable: For the landlord, allowing a sublease means they still have the original tenant on the hook. If the original tenant has a good track record, the landlord effectively has two layers of security (the tenant and the subtenant) ensuring rent is paid. The landlord can rely on the head tenant’s covenant and any guarantee in the head lease, which remain unchanged. This can be seen as a risk mitigation for the landlord, since the head tenant remains responsible for any default by the subtenantdavenportslaw.co.nz.

• Market Flexibility: Subleases can be arranged for shorter terms than the head lease, providing flexibility. For example, if only two years remain on the head lease, the tenant might sublease the second floor for those two years. Both tenant and landlord know that the situation will be revisited at lease expiry, at which point the landlord can re-lease each floor as desired. This temporary nature can be advantageous if the landlord is unsure about committing the second floor to a long new lease or if the tenant might need it back later.

• Tenant’s Ongoing Liability: The tenant remains fully liable to the landlord for the entire premises. If the subtenant stops paying rent or damages the property, the head tenant must cover the shortfall and then chase the subtenant (who may be insolvent or uncooperative). This means the tenant effectively becomes a landlord figure – bearing the landlord-type risks without owning the property. The original tenant must be prepared to enforce the sublease strictly and even evict the subtenant if necessary, all while continuing to pay rent to the head landlord if anything goes wrong.

• Administrative and Management Burden: Managing a sublease adds complexity for the tenant. The tenant will have to deal with collecting rent from the subtenant, monitoring the subtenant’s compliance, and handling any property issues on that floor (maintenance, repairs, etc.) that the subtenant is responsible for under the sublease. For instance, if the air conditioning fails on the second floor, the subtenant might call on the head tenant to liaise with the landlord for repairs. The tenant essentially takes on a property manager role for the subleased floor, which can be time-consuming.

• Consent and Transaction Costs: Although obtaining landlord consent should be straightforward if a suitable subtenant is found, it is an extra step that requires preparation. The tenant may incur legal costs to prepare the sublease and to satisfy any landlord’s conditions (like drafting a formal deed of consent or providing guarantees from the subtenant). The landlord might charge an administration or legal fee for processing the consent (some leases allow the landlord to recover reasonable costs of consent). These costs eat into the financial benefit of subleasing. Additionally, if the premises were not originally designed to be split, there could be one-off expenses (for example, installing separate utility meters for each floor, or partitioning access) to properly demarcate the sublease area.

• Limited Term and No Direct Renewal Right: The subtenant’s rights are entirely dependent on the head lease. If the head lease ends (or is surrendered by agreement between head landlord and head tenant), the subtenant has no independent right to stay. This could make it harder to attract a subtenant or limit the rent they are willing to pay if the remaining term is short. It can also mean the tenant might face pressure to renew their own lease solely to accommodate a subtenant’s desired term. In contrast, if the second floor were leased directly by the landlord, that new tenant could potentially sign a longer lease or negotiate renewals directly. Thus, subleasing might yield a shorter-term solution rather than a long-term tenant for that space.

• Landlord’s Concerns and Control: While the landlord having the head tenant as a buffer is a benefit, it also means if the subtenant isn’t ideal, the landlord has less direct recourse. A subtenant that, say, brings heavy foot traffic or uses the floor in an unusual way could impact the building (and other tenants, if any) without the landlord having the same control as if they were the direct lessor. The landlord might worry about reputational or property damage issues. For this reason, landlords sometimes impose detailed conditions in the consent (such as requiring the subtenant to have sufficient insurance, or approval of the subtenant’s fit-out plans, etc.). While these conditions protect the landlord, they add to the bureaucracy of the arrangement.

• Clear Separation of Tenants: By ending the current lease and replacing it with two separate leases (one for each floor), each occupant becomes a direct tenant of the landlord. The client tenant would have a lease just for the floor they occupy, and the other floor would be let directly to another tenant under a separate lease. This clean separation means each party’s responsibilities and rights are clearly confined to their demised area. The new tenant of the second floor would deal directly with the landlord for all matters on that floor, relieving the original tenant of any responsibility for space they no longer use.

• Release of Liability for Tenant: If negotiated properly, the original tenant can be released from liability on the second floor once the new lease is in place. This is a significant benefit – the tenant no longer has to worry about what happens on the other floor at all (financially or otherwise). The tenant’s financial obligations (rent, outgoings, etc.) would be reduced proportionately to only cover their one floor under the new lease. Essentially, the tenant is no worse off than if they had originally only leased one floor. This can provide peace of mind and allow the tenant to focus on their core business in the space they actually use.

• Direct Landlord Control and Long-Term Flexibility: For the landlord, having two separate leases gives direct control over who is in each space. They can negotiate the terms of the new lease for the second floor to their satisfaction (rent, term, permitted use, fit-out, etc.) without being constrained by the terms of the original lease. They could perhaps secure a longer lease term or a higher rent on the second floor if market conditions allow. In the long run, this arrangement converts the property into a multi-tenant building with independent leases, which might align better with the landlord’s portfolio strategy. Each lease could be renewed or ended on its own schedule. If the original tenant’s lease expires or they decide to leave later, the landlord at least still has the other floor’s tenant in place (or vice versa). This diversification can be commercially attractive.

• Potential for Improved Occupancy: Splitting the lease may fill the building more effectively if the new direct tenant for the second floor is a better fit or can utilize the space fully. Sometimes a landlord may have an easier time marketing a single floor to prospective tenants (for a long-term lease) than approving a sublease that might only run for the remainder of the original tenant’s term. In other words, the landlord might get a new stable tenant sooner rather than later. If the original tenant finds a candidate to take over the second floor, the landlord might prefer to sign that candidate to a fresh lease of their own rather than route it as a sublease, particularly if the remaining term on the head lease is short or if the landlord wants a fresh start with updated lease terms on that space.

• Negotiation Complexity: This approach requires three-party coordination – the landlord, the original tenant, and the prospective new tenant for the second floor (if identified). The original tenant must negotiate their release or variation, the landlord must negotiate a contract with the new tenant, and timing is crucial (to avoid gaps). It can be complicated to align everyone’s interests. For example, the landlord might only agree to release the original tenant if a satisfactory new lease is signed for the second floor (to avoid losing income). This could put the original tenant in the position of having to help find or incentivize that new tenant. The deal may involve multiple documents (a Deed of Surrender for the original lease, and two new lease agreements). The transaction costs (legal fees, brokerage fees for finding a new tenant, etc.) are likely higher than a simple sublease. All parties would need to carefully document the handover of responsibilities (e.g., ensuring the original tenant is cleared of make-good obligations on the second floor once it’s surrendered, etc.).

• Timing and Vacancy Risk: If the tenant does not already have a replacement tenant ready for the second floor, asking to split the lease could backfire. The landlord may not agree to let the tenant out unless and until another tenant is found. In a soft rental market, the second floor could remain empty for some time, and the landlord would insist the original tenant keep paying until a replacement is secured. In the worst case, if the original tenant simply surrenders the space without a replacement in hand, they might have to pay a hefty surrender fee or keep paying rent until the landlord re-lets it (depending on the surrender terms). There’s a risk of rent voids if a new lease doesn’t commence immediately upon the old lease’s partial termination. For the tenant, this means they could end up in a worse position (paying to exit the lease, and still being liable until a new tenant starts) compared to just subleasing and continuously receiving sub-rent.

• Loss of Potential Upside: Once the original tenant surrenders the floor and it’s re-leased, they lose any potential upside. For instance, if the sublease route was taken and the subtenant was paying higher rent than the original tenant’s rent (conceivably possible if market rent has risen but the original lease was at an older rate), the head tenant could even profit from the difference – but in a direct new lease scenario, any excess value goes to the landlord. While profit-making might not be the goal here, it highlights that the tenant gives up all interest in that part of the property. If the tenant’s business unexpectedly grows later, they can’t easily get the floor back – they would have to negotiate with the landlord or compete with others when the new tenant’s term ends.

• Impact on Guarantee and Other Lease Terms: If the original lease had personal guarantees or bonds, the landlord might insist that those remain in place until the new lease is secured or even for a period thereafter (in case the new tenant fails early). There is a negotiation risk that the landlord will not release guarantors of the original tenant, or will require the original tenant (or its guarantor) to guarantee the performance of the new tenant for some time as a condition of release. This would diminish the benefit of being released, as the original tenant could still be pulled back in if the new tenant defaults. The tenant should be cautious and ideally seek a clean break on the second floor, but the landlord will try to ensure they aren’t left in a worse position. Commercially, this might mean the tenant has to subsidize the new tenant’s rent or pay a one-off sum to the landlord as an incentive.

• Legal Formalities and Consent: If the lease is formally surrendered for one floor, and if the lease (or property title) was registered, the partial surrender might need to be registered or at least consented to by other interested parties (like a mortgagee, as noted earlier). Although not insurmountable, it adds a layer of formality. By contrast, a sublease does not usually require land registration dealings; it’s a more private arrangement subject to landlord’s consent.

Relevant NZ Legislation, Precedents, and Industry Standards

• Property Law Act 2007 (Sections 226–227): These sections codify the rule that a landlord’s consent to assignment or sublease cannot be unreasonably withheld or delayedcairnsslane.co.nz. They apply to most commercial leases (except those that explicitly forbid subletting/assignment). The Act requires the landlord to respond within a reasonable time and, if asked, provide reasons for any refusalcairnsslane.co.nz. A landlord who breaches this duty may be liable for losses. For example, in Reid v Estreich [2022] NZHC 1433, the High Court awarded damages to tenants when a landlord unreasonably obstructed a lease assignment, emphasizing that landlords must act reasonably when consent is requireddentons.co.nz. These principles equally apply to consents for subletting. In practice, most New Zealand commercial leases either incorporate this statutory standard or explicitly state the “consent not to be unreasonably withheld” condition, giving tenants some confidence that a well-presented subleasing proposal will be approved.

• ADLS Standard Lease Terms: The Auckland District Law Society (ADLS) deed of lease (6th edition 2012 and onward) is a widely used template for commercial leases in NZ. Under the ADLS lease (Clause 33.1 in recent editions), the tenant must obtain the landlord’s prior written consent to any sublease or assignment, and the landlord may require the incoming subtenant/assignee to be “respectable and responsible” (essentially, of good reputation and financial standing)alexanderdorrington.co.nz. The ADLS lease expressly states that the landlord’s consent cannot be unreasonably withheld in such casesalexanderdorrington.co.nz. (Notably, the ADLS form deletes the default implied covenant in the Act lexology.com, but substitutes its own wording to similar effect.) What counts as “reasonable” can be informed by case law: for instance, a landlord might reasonably refuse a subtenant that has a poor credit history or whose proposed use conflicts with other tenants. But a landlord withholding consent to gain a financial advantage or out of spite would likely be deemed unreasonablealexanderdorrington.co.nz. Industry practice, following the ADLS template, is that tenants provide a formal written request with details of the proposed subtenant, and the landlord responds with consent and conditions in writing. Conditions can include requiring the subtenant to sign a deed of covenant to observe the head lease terms, obtaining additional security (like a guarantee from the subtenant’s principals), and the head tenant paying the landlord’s reasonable legal costs for documenting the arrangement.

• Surrender by Agreement: There is no statutory right to surrender a lease early; it’s purely a matter of negotiation. The Property Law Act 2007 does not force a landlord to accept a surrender outside of specific contexts (for example, there are provisions allowing lease cancellation for breach or destruction of premises, but not simply because a tenant wants less space). Thus, any precedent for amending a lease comes from commercial practice. Landlords and tenants do sometimes execute deeds of surrender or variation. A precedent often cited is that a landlord will only agree to an early termination if “made whole” financially – either via a replacement tenant or compensationshieffangland.co.nz. The usual practice in NZ when a tenant needs to exit a lease is to either assign the lease to a new tenant (transferring the whole lease) or sublease. Partial surrender (giving up part of the premises) is less common, but not unheard of – it might occur in large leases where a tenant downsizes and the landlord carves out the excess space to lease to others. Each case tends to be bespoke. Importantly, if a lease is to be partially surrendered, landlord and tenant must clearly document what happens with rent, outgoings, and reinstatement obligations for that part. There isn’t a well-known case setting out rules for partial surrenders, since it’s fundamentally a contractual negotiation, but standard texts note that a surrender (even partial) should be in writing (ideally by deed) to satisfy property law requirements (similar to needing a written lease, per Property Law Act 2007 s.24 which requires contracts dealing with land to be in writing).

• Landlord-Tenant Industry Practice: The commercial leasing industry in NZ tends to favor solutions that keep tenants in business and properties tenanted. Especially in recent years with economic shifts, landlords have shown some flexibility – for instance, during the COVID-19 pandemic, many landlords negotiated rent reliefs and variations. Similarly, if a tenant approaches a landlord about excess space, a pragmatic discussion often follows. Many property managers would encourage a tenant in this situation to find a subtenant as the first remedy, since it’s usually faster than re-leasing formally. The data from Barfoot & Thompson (a major NZ real estate firm) highlighted that sublease space had grown dramatically, implying that many tenants opt to sublease rather than terminatebarfoot.co.nz. This indicates an industry norm: subleasing is an accepted way to deal with changing space needs. Landlords often even assist, by granting permission to advertise the sublease and sometimes by referring potential subtenants from their networks. On the other hand, if the tenant is a small business and the landlord fears they may default on the whole lease, the landlord might be proactive in reducing the tenant’s space to ensure the tenant can continue paying for at least one floor rather than go bankrupt over two. Each scenario can differ, but the overriding principle in NZ commercial leasing is cooperation and reasonableness – both of which are enshrined in law (e.g., the consent provisions of the Property Law Act). There may not be a trove of published cases on partial space issues because many such adjustments are negotiated privately without litigation.

• Case Law on Sublease Issues: While few cases squarely address subleasing part of premises, general landlord-tenant case law provides guidance. The English case Ashworth Frazer (cited above) is often referenced in NZ to explain what a “reasonable” refusal might entail – e.g., a landlord can refuse a subtenant who is likely to breach a user covenantalexanderdorrington.co.nz. New Zealand courts would likely adopt similar reasoning under our Property Law Act’s framework. Additionally, if a sublease is granted without the required consent, the head landlord in NZ can treat that as a breach of the lease. The Property Law Act 2007 allows a lease to be cancelled for breach after due notice (s.244, for example, sets out the cancellation process for breach). Entering an unauthorized sublease could trigger such a process, so it’s vital to follow the proper consent procedure to avoid giving the landlord grounds to cancel the entire lease.

Practical Implications for Tenant and Landlord

• The tenant should engage early with the landlord upon realizing one floor is unused. Open communication can lead to collaborative solutions. However, the tenant should be aware that the landlord is under no obligation to reduce the rent or area of the lease just because of the tenant’s reduced need.

• If the tenant opts to pursue a sublease, they should find a suitable subtenant (or use a commercial leasing agent to market the second floor) and prepare a proposal for the landlord. The proposal should include information about the subtenant’s identity, business, financial stability, and the key terms of the sublease (area, rent, term). Since the landlord’s consent is needed, presenting a well-thought-out subtenant proposal will speed up approval. The tenant will need legal advice to draft a sublease document that dovetails with the head lease – ensuring, for example, that the sublease ends by the lease expiry and that the subtenant’s obligations mirror the tenant’s obligations to the head landlord. The tenant must also budget for potential costs: the subleased floor might need separate insurance or minor alterations to accommodate the new occupant (with landlord’s approval). Once in place, the tenant should treat the role of sublandlord professionally, monitoring the subtenant’s compliance and maintaining a good relationship both upward (with the head landlord) and downward (with the subtenant).

• If the tenant instead negotiates a lease amendment (partial surrender), they should be prepared to justify the request in terms of mutual benefit. The tenant might offer to assist in finding a direct replacement tenant for the second floor (to make it easier for the landlord to agree). They should also be prepared for a possible one-time cost – for example, agreeing to pay the landlord the equivalent of 3–6 months’ rent as a sweetener for releasing the space (depending on market conditions). The tenant would need a lawyer to draft the necessary surrender/variation agreements and to ensure they are released from all future obligations on the second floor. They also should consider any make-good (restoration) obligations: If they installed fixtures or alterations on the second floor, the landlord might require these to be removed or the space restored to a certain condition upon surrender. This needs to be negotiated (sometimes the new tenant or landlord will take the space “as is”). The tenant must also get clarity on any guarantees – if the tenant’s directors personally guaranteed the original lease, they want to be released as to the second floor obligations once surrendered, so that their guarantee doesn’t linger for someone else’s occupancy.

• Timeframe: Subleasing can often be accomplished relatively quickly (perhaps a few months to find a subtenant and document the deal). Renegotiating the lease may take longer and is contingent on factors outside the tenant’s control (like finding a new tenant acceptable to the landlord). During this period, the tenant must continue to pay rent on both floors, so the sooner a solution is implemented, the better for the tenant’s cash flow.

• The landlord should consider the financial ramifications of each approach. If the current tenant is reliable and paying, a sublease ensures that status quo continues (with the tenant’s covenant intact). The landlord’s main task is to vet the subtenant and document the consent. If the landlord is inclined to recapture the space, they must weigh the risk of vacancy and re-leasing cost against the benefit of potentially getting a new tenant directly. The landlord might silently prefer the sublease route to keep things simple, unless they have a strategic reason to want a direct relationship on that floor (for instance, if they have another tenant lined up or they want to reconfigure the building’s leasing structure).

• Legally, the landlord must abide by the Property Law Act 2007 constraints: if the tenant’s lease allows subletting with consent, the landlord should not unreasonably refuse a decent subtenant. Landlords often protect themselves by replying with conditional consent. For example, the landlord might require that the subtenant has insurance naming the landlord as an interested party, or that the subtenant’s use of the premises is restricted to the same use as the tenant’s (to avoid any change of use issues). The landlord will also likely want assurances that the sublease rent is not so low as to drag down market comparisons (though as noted, case law suggests even if it is lower, that alone may not be a valid ground to refuse consentalexanderdorrington.co.nz, so long as rent is still paid by the head tenant). The landlord might include a clause (if consenting in writing) that any rent data from the sublease shall be ignored in future rent reviews to protect against thisalexanderdorrington.co.nz.

• If proceeding with creating two leases, the landlord will have to put in the work to negotiate a new lease for the second floor. This means dealing with brokerage, offering terms, and possibly a period of vacancy. The landlord would want to time the surrender and new lease signing concurrently to avoid any gap. There’s also an implication for property management: two separate tenants mean two sets of rent invoices, two sets of contacts for operational matters, and possibly apportionment of shared services (if any). The landlord might need to update how outgoings (property expenses) are charged – originally the single tenant paid 100% of outgoings; now each tenant might pay a proportion (likely split by floor area). The landlord’s lawyer would need to adjust the lease documents accordingly.

• Precedent practices for landlords in NZ encourage fairness. Many landlords are aware that holding a tenant to space they can’t use may lead to that tenant getting into financial strife, which benefits no one. Thus, commercially savvy landlords often allow subleasing and sometimes even assist in finding subtenants (because an occupied building is better for security and maintenance than an empty space). Landlords will also look at the bigger picture: If the tenant is a long-term client they want to keep, accommodating the tenant’s space needs could foster goodwill and increase the chance the tenant stays (at least in one floor) for the long term. On the flip side, if the landlord senses that the tenant’s business is contracting and perhaps a risk to even pay for one floor, the landlord will be motivated to secure a new reliable tenant for the second floor as soon as possible – possibly by agreeing to split the lease. This risk assessment is case-by-case.

Conclusion and Recommended Approach

1. Check the lease for any clauses on assignment and subleasing (likely there is a clause requiring landlord’s consent and possibly conditions for any subtenant/assignee’s quality). Also check if there’s any clause about early termination or space reduction (unusual, but worth confirming none exists).

2. Discuss with the landlord the situation – emphasize that the business only needs one floor and see if the landlord has any suggestions or preferences. The tenant can express willingness to sublease (which shows responsibility) but also gauge if the landlord would consider a direct re-letting of the extra floor. This conversation should be framed collaboratively: both parties generally want the space occupied and rent paid.

3. Pursue a subtenant: In parallel, the tenant should begin looking for a subtenant (with the landlord’s knowledge). Once a candidate is found, formally apply for landlord’s consent in writing, providing all details required under the lease/Act. Keep a paper trail to show the consent request, as the Property Law Act 2007 protections (like the requirement to respond in a reasonable time) will then applycairnsslane.co.nz.

4. Legal documentation: Have a lawyer prepare the sublease agreement, ensuring it is conditional on obtaining the landlord’s written consent (to avoid inadvertently breaching the lease by signing a sublease too early). The sublease should incorporate key head lease terms and specify that it ends by (or at the same time as) the head lease expiryalexanderdorrington.co.nz. Arrange for the subtenant to provide any requested guarantees or security to both the head tenant and indirectly the landlord if required.

5. Alternate plan: If no suitable subtenant is found after diligent effort, reconsider approaching the landlord for a more direct solution (perhaps offering a surrender fee or other incentive). At that stage, the tenant might even propose an assignment of the entire lease to a new tenant who will take both floors, if the tenant would rather relocate entirely to a smaller premises. (While not the scenario asked about, a full assignment is another fallback: find someone to take over the whole lease, then the tenant could lease a smaller place elsewhere. This would end their obligations if done with landlord consentshieffangland.co.nz.)

• Property Law Act 2007, ss 226–227 (landlord’s consent to assignment/sublease not to be unreasonably withheld or delayed)cairnsslane.co.nz.

• Property Law Act 2007, s 215(3)–(4) (excess term of sublease truncated to head lease term)alexanderdorrington.co.nz.

• ADLS Deed of Lease (6th ed.) cl 33.1 (requiring “respectable” subtenant and permitting subletting with landlord’s reasonable consent)alexanderdorrington.co.nz.

• Reid v Estreich [2022] NZHC 1433 (example of court finding landlord’s withholding of consent unreasonable, highlighting the duty of reasonableness)dentons.co.nz.

• Davenports Law, “Options to get out of a Commercial Lease” – on surrender, assignment, sublease and necessity for landlord’s agreementdavenportslaw.co.nzdavenportslaw.co.nz.

• Shieff Angland, “Surrender, Assignment, or Sublease – A Tenant’s Guide” – notes that absent express lease provisions, surrender is by negotiation often with a fee, and that subleasing keeps the original tenant liable under the head leaseshieffangland.co.nzshieffangland.co.nz.

• AlexanderDorrington, “6 Things to Consider Before Subleasing” – practical tips (ensure subtenant is reputable, consider impact on rent review, etc.) and confirms requirement of landlord’s prior consent under standard NZ leasesalexanderdorrington.co.nzalexanderdorrington.co.nz.

• Barfoot & Thompson Commercial, market commentary on sublease space – illustrating the rise in subleasing in Auckland (326% increase in sublease availability, with major companies subletting large portions of space)barfoot.co.nzbarfoot.co.nz.