If you’re about to sign an Agreement for Lease (often shortened to an “AFL”), it’s usually a good sign your business is growing. Maybe you’ve found the perfect site, negotiated the headline rent, and you’re ready to lock it in.
But here’s the catch: an Agreement for Lease isn’t just “admin” before the real lease arrives. It’s a legally binding contract that can commit you to a lease on terms that may not be as flexible (or as landlord-friendly) as you expect.
This updated guide reflects how agreements for lease are commonly used in New Zealand right now, including the practical risks we keep seeing for tenants in build, fit-out, relocation, and expansion situations.
So, do you need to review your Agreement for Lease? In most cases, yes. If you’re taking on a new commercial site (especially where construction, refurbishment, or landlord works are involved), reviewing the AFL can save you from expensive surprises later.
What Is An Agreement For Lease (And Why Does It Matter)?
An Agreement for Lease is a contract where you and the landlord agree now that a lease will be entered into later, once certain conditions are met.
It’s common when:
- the premises are still being built or renovated;
- you need time to do a fit-out;
- the landlord needs to complete works before you can move in;
- there are approvals needed (for example, council sign-off or compliance documentation); or
- you’re negotiating terms now but the “start date” is in the future.
Even though it’s called an “Agreement for Lease”, it’s not a casual promise. Once signed, it can be enforceable like any other commercial contract. That means if you later decide the premises won’t work, or your project runs over budget, you may still be locked in (or face significant costs to exit).
How Is An AFL Different From The Lease Itself?
Think of it like this:
- The lease governs the ongoing relationship once the tenancy starts (rent, outgoings, maintenance, insurance, renewal rights, assignment rules, and so on).
- The AFL sets the rules for getting to that point (what needs to happen before the lease begins, who does what works, when the start date triggers, and what happens if things go wrong).
In practice, many AFLs attach the form of lease as a schedule, and the AFL says the parties must enter into that lease once the conditions are met. That’s why reviewing the AFL often means reviewing both documents together.
Is An Agreement For Lease “Binding” In New Zealand?
Often, yes. Whether it’s enforceable depends on the wording and whether the essential terms are sufficiently certain, but you should assume it can be binding once signed.
Commercial leasing arrangements also sit alongside general contract principles (including the Contract and Commercial Law Act 2017) and property law concepts (including the Property Law Act 2007). The key takeaway is simple: if you sign an AFL without understanding the triggers and consequences, you can end up committed earlier than you realise.
When Should You Review Your Agreement For Lease?
The best time to review an Agreement for Lease is before you sign anything and ideally before you pay a large deposit or commit to build/fit-out costs.
It’s especially important to get a review if any of these apply:
- The premises aren’t ready yet (new build, refurbishment, or landlord works are still pending).
- You’re relying on “promises” made during negotiations (for example, “we’ll fix the air con” or “you’ll get signage rights”).
- You’re contributing to works or paying an incentive/fit-out contribution in stages.
- The start date is uncertain (for example, linked to practical completion, code compliance, or handover).
- You have a strict business deadline (opening date, seasonal rush, staff hiring, marketing launch).
- You’re taking a significant lease term (for example, 3–6 years plus renewals) and the site is business-critical.
- The deal feels “standard” but the numbers are big (rent, outgoings, bank guarantees, and fit-out costs add up fast).
Why Reviewing The AFL Is Usually Worth It
When you review an Agreement for Lease properly, you’re looking for two things:
- Commercial clarity (do the dates, costs, and deliverables actually match what you negotiated?)
- Legal risk management (are you taking on obligations that could hurt you if the project delays or the relationship deteriorates?)
It’s very common for tenants to focus on rent and term, but miss the clauses that really drive cost and stress: delay risk, variation risk, defect risk, and “deemed acceptance” of the premises.
If you want a formal review of your document (and not just a quick read-through), an Agreement for Lease Review can help you understand what you’re signing and negotiate improvements before you’re locked in.
What Are The Biggest Risks In An Agreement For Lease?
Every AFL is different, but there are a few “repeat offenders” we see in commercial leasing disputes and stressful negotiations.
Below are the key areas that usually deserve a close look (and, ideally, negotiation).
1. Conditions Precedent (What Must Happen Before The Lease Starts)
AFLs often include conditions like:
- the landlord completing base build works;
- obtaining a code compliance certificate (or other approvals);
- the tenant obtaining finance;
- the tenant obtaining required licences or consents;
- the tenant approving plans/specifications.
You’ll want to check:
- Who controls the condition (is it genuinely outside your control, or can the landlord “tick it off” unilaterally?)
- Whether there’s a longstop date (a final deadline where, if it hasn’t happened, you can walk away)
- What happens if the condition isn’t met (termination rights, cost recovery, refunds of deposits)
Without a clear longstop date and a fair termination mechanism, you can be stuck in limbo while costs mount elsewhere (storage, staffing delays, lost revenue).
2. Practical Completion, Handover, And “Ready For Fit-Out” Definitions
Many disputes come down to definitions. For example:
- What counts as “practical completion”?
- Does “ready for occupation” mean compliant, or just accessible?
- Does the landlord have to deliver services (power, water, HVAC) and certifications, or is it “as is”?
If the definition is vague, you risk being forced to start paying rent (or start the lease term clock) before the site is genuinely usable.
3. Rent Commencement, Incentives, And Early Payment Triggers
In an AFL situation, the timeline matters. You’ll want to confirm:
- When rent starts versus when you get access for fit-out;
- Whether there’s a rent-free period and what it’s linked to (access date, practical completion, opening date);
- Whether outgoings start immediately (sometimes they do, even during fit-out);
- What evidence is required to trigger key dates (notice requirements, inspection sign-off, certificates).
If your lease start date can be triggered by a landlord notice alone, you’ll want to be very comfortable with how that notice works and what your rights are to dispute it.
4. Variations And Changes To The Works
Construction and fit-outs rarely go exactly to plan. The AFL should cover:
- Who approves variations;
- How pricing works for changes;
- Whether the landlord can change plans without your approval;
- Whether you can request changes and what happens to timeframes.
A tenant-friendly AFL usually tries to avoid “blank cheque” outcomes where the landlord can vary works and pass the cost (or the delay) straight onto you.
5. Defects, Warranties, And Who Fixes What
Ask yourself: if something is wrong when you move in, who is responsible?
Common issues include leaks, HVAC not working, compliance issues, incomplete services, and defects that only show up after you begin operating.
You’ll want the AFL and attached lease to clearly deal with:
- Defects liability periods (and how defects must be notified);
- Who pays for rectification;
- Whether you can withhold rent (often you can’t, unless negotiated);
- Whether you can delay opening or claim compensation.
6. Access Rights During Fit-Out And Build
It’s surprisingly common to see AFLs that promise access, but with lots of restrictions (limited hours, no storage, approvals required for every contractor, landlord can suspend access).
If you have a tight opening date, access restrictions can be the difference between launching on time and burning money for weeks.
7. Allocation Of Risk If Things Go Wrong
This is the heart of the review.
For example, if the landlord’s works run late, does the AFL provide:
- a rent-free extension?
- a right to terminate after a certain delay?
- liquidated damages (a fixed amount payable per day/week of delay)?
- nothing at all (meaning you carry the cost)?
Sometimes a practical solution is negotiating a documented rent abatement arrangement linked to specific delay events, so you’re not paying full rent when you can’t reasonably trade.
How Does A Lease Review Help If The Document Is “Standard”?
A lot of landlords use templates (often an ADLS-style lease for commercial property, or a landlord’s preferred precedent). That doesn’t automatically make it fair, or appropriate for your business.
A review helps you spot issues that are easy to miss when you’re focused on the big picture.
A Good Review Usually Covers Both Legal And Commercial Issues
When we review an AFL, we’re usually checking things like:
- Is the “deal” accurately reflected? (rent, term, renewal rights, incentives, works, timelines)
- Are the conditions realistic? (and do you have termination rights if they’re not met?)
- Are your costs clearly defined? (outgoings, marketing levies, insurance, utilities, compliance costs)
- Are you protected if things go wrong? (delays, defects, incomplete works, access issues)
- Do you have flexibility later? (assignment, subleasing, change of use, expansion)
For example, many tenants don’t realise that “use” restrictions can limit what you can sell, what services you can add, or even whether you can pivot if your business model changes. It’s worth checking the permitted use clause carefully before you commit to a site.
It Also Helps You Avoid Getting Stuck Later
Even if the first year goes well, you might eventually want to:
- sell the business;
- bring in a business partner;
- relocate;
- assign the lease to a buyer; or
- sublease part of the premises.
If the lease attached to your AFL makes assignment difficult (or gives the landlord broad discretion to refuse), that can seriously affect the value and saleability of your business. The rules around assigning a lease are a good example of an issue that’s much easier to negotiate upfront than after you’ve already signed.
What Does The Agreement For Lease Review Process Look Like?
If you’ve never worked with a commercial leasing lawyer before, the process is usually straightforward and practical.
Step 1: Send Through The Full Document Pack
For an AFL review, that usually includes:
- the Agreement for Lease (including any special conditions);
- the attached form of lease (and any schedules);
- plans/specifications and scope of works (if available);
- any incentive side letters (rent-free, landlord contribution);
- key emails or heads of agreement setting out the deal.
Even small attachments matter. Sometimes the “real” obligations are hidden in schedules or technical documents (especially around building works and handover requirements).
Step 2: Identify Your Business Priorities (So The Review Is Practical)
A good lease review isn’t just about marking up legal wording. It should match how you’ll actually use the site.
We’ll typically ask things like:
- When do you need access?
- What’s your target opening date?
- How long is your fit-out likely to take?
- Do you need signage rights?
- Will you need extraction, grease traps, high power, or water connections?
- Do you plan to grow, sell, or potentially relocate in a few years?
Step 3: Get Clear Advice (What’s Risky, What’s Negotiable, What’s Market)
The outcome you want is clarity: what the document really means, what the risks are, and what you can do about them.
That might include:
- a written summary of key issues;
- suggested amendments to propose to the landlord;
- drafting replacement clauses (for example, around delay and termination); and
- strategy on what to push for versus what to accept.
If you need a broader lease review (beyond the AFL mechanics), a Commercial Lease Review is often the right fit, because it looks at how the lease will work day-to-day once you’re operating.
Step 4: Negotiate And Finalise
Negotiation is normal in commercial leasing. Most landlords expect a level of back-and-forth, particularly where:
- the tenant is committing to a meaningful term;
- the tenant is investing heavily in fit-out;
- the premises aren’t ready yet (meaning your risk is higher); or
- special conditions are being introduced.
If you want a lawyer in your corner for the negotiation (not just a document review), chatting with a Commercial Lease Lawyer can make the process quicker and a lot less stressful.
How Long Does A Review Take?
Timing depends on how complex the deal is and how quickly the other side responds. But as a general rule, it’s smart to build in time for:
- the initial review;
- one or two rounds of negotiation;
- final document circulation and signing.
If your opening date is tight, tell your lawyer early. AFLs can have multiple moving parts (build, handover, access, incentives), and those details are much harder to fix once you’re committed.
Key Takeaways
- An Agreement for Lease can be legally binding and can lock you into a future lease before the premises are even ready.
- Reviewing your AFL is especially important when the site is still under construction, renovations are pending, or your rent start date depends on “practical completion” style triggers.
- Key risk areas include conditions precedent, longstop dates, handover definitions, delay risk, variation costs, defects responsibility, and access rights for fit-out.
- Many AFLs attach the final lease as a schedule, so a proper review usually needs to consider both documents together.
- Getting the AFL right upfront protects you from day one and can prevent costly disputes (or an unworkable site) later.
- If you’re unsure what you can negotiate, a lease lawyer can help you separate the “standard” terms from the clauses that could expose you to serious risk.
If you’d like help reviewing or negotiating an Agreement for Lease, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
