Buying a tenanted commercial building: the building-side lease checks before you go unconditional
When you buy a tenanted commercial building you take over the landlord's side of every lease on it, and the owner's statutory duties for the building itself. Before going unconditional, read each lease for which building costs the tenant actually reimburses and which stay with you, and read the building records for the costs those leases will not cover. The number that matters is the rent less the landlord's own building costs over the next few years.
Start with the agreement, then the leases
The standard ADLS/REINZ agreement (now published with The Law Association of New Zealand, TLANZ) has a Tenancies box on the front page, with the particulars of each tenancy in Schedule 3. Check Schedule 3 against the signed leases, and ask for every variation, renewal, assignment and guarantee that goes with them. The vendor warrants there are no undisclosed notices, demands or requisitions outstanding from a tenant or any other party (clause 7.1), so ask in writing whether any tenant has raised a repair demand or a rent review dispute.
Law-firm commentary reports that the current standard lease form, the Deed of Lease seventh edition 2024, adds a field for the building's seismic rating. Most leases you inherit will be on an earlier edition or a bespoke form, and the allocation of building costs differs between them, so read the actual outgoings and repair clauses and have your lawyer confirm what they mean.
Which costs the lease leaves with you
Commercial leases commonly separate the operating outgoings a tenant reimburses from the items that stay with the landlord, which in practice are usually the structure, the roof and cladding at end of life, seismic strengthening, and replacement of major plant. Whether a given lease follows that pattern is a matter of its wording, so build a two-column list for each lease from the clauses themselves: what the tenant pays, what you pay.
A measure investors commonly use alongside that list is WALT, the weighted average lease term: the remaining lease terms weighted by each tenant's share of income or area, as a gauge of income security and rollover risk. It describes the leases, not the building.
An example (invented, for illustration): a three-tenant building shows a WALT of 2.1 years. The property file and the last condition report put the roof at end of life, and two of the three leases expire within 18 months. The roof, the vacancy and the re-letting costs all land inside the period the yield was calculated on. Our note on information memorandum red flags covers the other figures worth testing.
The owner's duties come with the title, whatever the lease says
Some obligations attach to the owner under statute. A lease can shift the cost, not the duty.
Compliance schedule and BWOF. A building not used wholly as a single household unit needs a compliance schedule if it has any specified system, such as sprinklers, fire alarms or lifts (Building Act 2004, section 100). The owner must supply the annual building warrant of fitness with the independently qualified person certificates attached and display it (sections 105 and 108), with fines up to $50,000 for an individual and $150,000 for a body corporate for failing to. The vendor warrants a current BWOF at settlement (clause 7.3(6)), so ask for the BWOF, the compliance schedule and the last 12 months of IQP reports. Whether tenants reimburse the IQP costs is a lease question; the duty is yours.
Asbestos. On settlement the buyer usually becomes the person with management or control of a workplace, and the Health and Safety at Work (Asbestos) Regulations 2016 then require asbestos that is or is likely to be present to be identified and a written management plan kept up to date and reviewed at least every five years. WorkSafe says buildings built before 1 January 2000 are likely to contain asbestos material. Ask for the survey, the current plan and its last review date.
Rates. Rates are a charge against the rating unit, not a debt of the seller (Local Government (Rating) Act 2002, section 59); the vendor's no-arrears warranty (clause 7.3(3)) is the backstop, so have it checked at settlement.
Seismic: the lease wording and the law are moving apart
Under the current Building Act test a building is earthquake-prone if its ultimate capacity would be exceeded in a moderate earthquake and collapse would be likely to cause injury, death or damage to other property (section 133AB), with notices recorded on MBIE's public EPB register.
Media reported that the Building (Earthquake-prone Buildings) Amendment Bill passed its third reading on 18 or 19 September 2026; at the time of writing Royal assent had not been confirmed, so it is not yet law. As reported from select committee, the Bill removes Auckland, Northland and the Chatham Islands from the earthquake-prone system and repeals the regulations behind the familiar %NBS rating categories. Legal commentary has flagged that lease clauses and lending conditions keyed to a %NBS number may lose their anchor once those regulations go, so if any lease you are inheriting has a %NBS clause, for rent abatement, termination or a landlord obligation to strengthen, ask your lawyer how it reads afterwards.
GST, briefly
Trueworks is not a tax adviser; this is the shape of the rules only. Compulsory zero-rating under section 11(1)(mb) of the Goods and Services Tax Act 1985 applies to a supply of land between GST-registered parties where the buyer intends to use it for making taxable supplies and not as the principal place of residence of the buyer or a person associated with the buyer, all tested at settlement; otherwise the supply is taxed at 15%. The duty to notify the vendor of your registration status and intended use sits with the buyer (section 78F), and if that information is wrong the buyer is treated as the supplier and wears the GST (section 5(23) to (23B)). The going-concern zero-rating in section 11(1)(m) still exists, but the standard agreement applies its going-concern warranties only where section 11(1)(mb) does not apply (clause 15.1). Confirm all of this with your accountant before you sign the GST statement.
Costing the landlord's side for the next five years
From the leases, list every building element and item of plant that is yours. From the property file, the compliance schedule, the IQP reports and any condition report, put an age and a condition against each. Then put a dated replacement or repair cost against each, plus the vacancy and re-letting cost for each lease expiring in the period. A commercial building inspection or condition report gives you the condition; current build cost per m2 benchmarks give a first-pass figure for the larger items. The commercial property due diligence checklist shows where this fits in the conditional period.
What this doesn't tell you
It does not tell you what your leases say. That is each lease's wording, and your lawyer reads it.
It is not tax advice. Your accountant applies the GST rules to you.
The earthquake-prone reform was passing through Parliament at the time of writing; its final text and commencement need checking on the day you rely on them.
Condition and remaining life of the roof, plant and structure come from an inspector or engineer on site.
FAQ
What should I check in the leases when buying a tenanted building?
Every signed lease with its variations, renewals and guarantees, checked against Schedule 3 of the sale agreement; the outgoings and repair clauses; the expiry and review dates; and any clause keyed to a seismic rating.
Which outgoings can a landlord recover from a commercial tenant?
Only those the lease says the tenant pays. Leases commonly pass operating outgoings such as rates, insurance and routine maintenance to the tenant and leave structural, seismic and capital replacement with the landlord, but the specific lease governs.
Who pays for seismic strengthening under a commercial lease?
It depends on the lease; in practice strengthening is commonly treated as the landlord's capital cost unless the lease says otherwise. Check each lease for any seismic or %NBS clause, and ask your lawyer how it reads under the 2026 reform.
What happens to the rent if the building is found to be earthquake-prone?
Only the lease can answer that. Some leases have express provisions for rent abatement or termination if the building becomes earthquake-prone; many are silent, so have your lawyer read the clause.
Is GST charged when buying a tenanted building as a going concern?
Between GST-registered parties, a sale of land the buyer will use for taxable supplies is compulsorily zero-rated under section 11(1)(mb) of the GST Act, tested at settlement, and the standard agreement applies its going-concern provisions only where that section does not apply. The buyer wears the GST if its statement is wrong, so confirm your position with your accountant before signing.
How do I estimate the landlord's capital costs for the next five years?
List every element and item of plant the leases leave with the landlord, take its age and condition from the property file and a condition report, and put a dated replacement cost against each, plus vacancy and re-letting costs for each lease expiring in the period. Set that total against the rent.
Get the leases read against the building
If you have an information memorandum, the leases and a property file for a tenanted building, send them through and we will tell you in writing what the records show. Independent analyst, not a valuer, engineer, surveyor, building inspector or lawyer.
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