Associate Director, Paul Mautz has been actively involved in assisting clients affected by the Christchurch earthquakes. This hands-on experience led to an invitation to present the key lessons for tenants at the recent annual conference of the Property Institute of New Zealand.

Paul’s presentation focused on the key learnings that came out of experiences of Dow clients, whose premises were damaged by the earthquake, some quite significantly. The key message is that tenants can better prepare themselves for a major event such as an earthquake.

The key issue for most clients was whether their leases were still on foot after the earthquakes and whether they should continue paying rent. Many leases were unclear on these issues and have led to confusion for both landlord and tenants. The Auckland District Law Society Lease (the most common format in Christchurch) does not deal adequately with force majeure events and is vague on the exact process when an event like this occurs. In some cases the buildings had minor damage but were in the red zone so were inaccessible. This has highlighted that a wider definition of what constitutes ‘untenantable’ premises is required when drafting leases in the future. If the premises are inaccessable then they are in effect unoccupiable!

Identifying/procuring alternative premises had clients questioning whether to keep all or only part of their business in Christchurch. This will continue to be a major consideration for businesses thinking about their future accommodation needs. With short term/medium term options being relatively limited in size, spreading over multiple sites has been necessary in some cases. This has had the effect of imposing more inefficiencies and higher costs on business operations. Companies that have the flexibility to operate remotely fair best in this environment.  

Paul notes that while dealing with the effects of an earthquake can be somewhat haphazard, a contingency plan focusing on the immediate aftermath of a quake and a short term business recovery plan will reduce stress and allow the business to get up and running more quickly.

Other learnings evident from the Paul’s work include the requirement to undertake a greater level of due diligence around the seismic strength of buildings in the future (many Councils now hold lists of earthquake prone buildings) and the need to make sure existing plant and equipment in premises are well secured to prevent injury or loss of life in a significant quake.

Paul’s message is clear. Become better prepared and look at your current and future lease provisions more carefully in regard to force majeure events.

A copy of Paul's presentation is available by clicking on this link.