Commercial tenants and guarantors often overlook their continuing obligations when a lease enters a holding over period. Under the Law Association of New Zealand’s Seventh Edition Deed of Lease (“Lease”), clause 40.1 provides that where the landlord permits the tenant to continue occupying the premises after expiry of the term, the Lease continues under the same terms until either party terminates the Lease by providing 20 working days’ notice to the other. This period is referred to as a ‘holding over’ period.

Of particular importance and caution is the automatic continuation during this period of a guarantor’s obligations as the Lease provides that the guarantee and indemnity extend to any holding over by the tenant. This means that a tenant can go past the end of the term, without the permission or consent of the guarantor, and the guarantee remains in place as if the Lease had been renewed.

Further caution is warranted when assigning a lease. If a tenant assigns their interest to a new tenant, the original guarantor’s obligations do not automatically end unless the landlord expressly releases the guarantee. This means the guarantor may remain liable for breaches by the incoming tenant – even if the original tenant has long since vacated the premises. This risk is compounded if the assignee enters a holding over period, as the guarantee remains enforceable during that time. Parties involved in an assignment should carefully negotiate the terms of release and ensure all security arrangements, including guarantees and bank guarantees, are appropriately updated and documented.

In summary, the parties (particularly tenants and guarantors) should be aware that their obligations do not automatically terminate upon expiry of the term of the Lease and may continue for an unexpected duration of the holding over period and potentially beyond.

For more information on the obligations of commercial landlords and tenants, or for tailored drafting or advice on your commercial lease, get in contact with our commercial team 

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The information contained in this article is necessarily of a generalised nature and is correct as at June 2025. Specific advice should be sought in relation to any particular situation.

Article written by Richard Nicholas