New Zealand: Property Law Act 2007 - the effect of Sections 268-272 on landlord-tenant recovery

Insurance Update
Last Updated: 1 March 2010
Article by Peter Leman

When the Property Law Act 2007 (PLA) came into effect it seemed to be one of those rare pieces of legislation that made life simpler – landlords could no longer recover from tenants for destruction or damage to 'leased premises, or the whole or any part of the land on which the leased premises are situated'. Of course there were exceptions to the general exclusion of recovery, such as when the destruction or damage was done intentionally by the tenant (see section 269(3) PLA). It appeared that an area of recovery/liability conflict was gone. Of course, nothing is as simple as it first seems.

One uncertainty was whether the protection afforded tenants was for them alone, or whether it extended to protect employees of the tenant. The recent case of Sheehan v Watson1 has clarified that issue – tenant's employees are as protected as the tenant itself. Other questions remain, however.


The first hurdle for any person considering the application of the PLA regime is deciding exactly what destroyed or damaged property falls under its provisions. The ambit of the PLA regime will, perhaps, not become clear until more cases are taken to court for judicial consideration. The issue lies in the phrase below which comes from the opening words of section 268:

Sections 269 and 270 apply if, on or after 1 January 2008, leased premises, or the whole or any part of the land on which the leased premises are situated, are destroyed or damaged by one or more of the following events...[emphasis added]

The phrase, to which we have added emphasis, is not defined in the PLA nor is it a phrase that has been judicially considered.

Despite the uncertainty surrounding what the phrase intends to cover, a general observation can be drawn.

The property covered by the PLA extends beyond the footprint of the leased premises - the PLA covers destruction and damage to the land on which the leased premises are situated. This seems to suggest that the PLA regime intends to prevent recovery for destruction or damage that is caused to surrounding land when the source of the damage is from the leased premises

For example, envisage the scenario of a multi-storey building with multiple tenancies. Obviously the 'leased premises' for tenant A will not include what is leased by tenant B, yet the land on which both leased premises are situated is the same. Due to the PLA regime, the costs of remedying the destruction or damage to tenant B's leased premises, which has been caused by the negligence of tenant A, should not be recoverable from tenant A (or tenant B) by the landlord.

However, we are still left with the uncertainty of exactly what the term 'leased premises' includes. Is it only the building structure ('real property'), or does it include the chattels ('personal property')?

Without judicial guidance, dictionary definitions provide assistance. Black's Law Dictionary defines 'premises' as 'a house or building, along with its grounds'. This definition suggests that 'premises' refers only to real property. 'Leased premises' should therefore refer to the real property that is the subject of the lease.

But what amounts to 'real property'? The dividing line between real and personal property can be blurry. Any object that is fixed to the land or building becomes real property. However, determining whether something is a fixture is sometimes a difficult exercise. Consider the following items and whether they would be defined as part of the 'leased premises':

  • Fitted carpet that is not glued to the floor.
  • Window-mounted removable air conditioning units.
  • A dishwasher or stove.
  • A heat-pump.

As the above shows, deciding exactly what falls under the term 'leased premises' can be problematic. However, the boundaries of what is covered by the PLA regime will have to be decided in order to determine what costs a negligent tenant is protected from in a recovery action brought by the landlord (or its insurer).


While there is uncertainty over the extent of property covered by the PLA regime, it is useful to consider a scenario to illustrate the PLA regime's possible application and to address the other issues that may arise. This includes issues such as the recovery of losses consequential upon destruction or damage to property.


Green Inks Ltd owns a two-storey building and occupies half of the ground floor. Green Inks' business is making printers' inks. The other half of the ground floor is leased to Leather Bindings Limited, a specialist book binder. Aotea Printing Limited leases level 2.

One day, Shane Smith, a printer's apprentice employed by Aotea, was washing his hands. He left the tap running which overflowed the basin and flooded level 2 of the building, as well as causing damage to the building on the ground floor below. The plant and stock of both ground floor occupants were damaged, and both suffered a business interruption loss. Green Inks also had to give rent rebates to both Aotea and Leather.

The following losses were paid by the respective insurers (correctly calculated with no betterment), and subsequently claimed against Aotea.

Green Inks

Building repairs


Loss of rent


Plant repairs


Stock loss


Business Interruption





Plant repairs


Stock loss


Business Interruption





Building repairs

The cost associated with repairing the building should be within the ambit of the PLA regime and therefore not recoverable from Aotea. The building is both the leased premises (being Aotea's second floor) and the land on which the leased premises are situated (being the rest of the building - the ground floor). The building is real property. Sub-sections 269(1)(a) and (b) provide:


(1) If this section applies, the lessor must not require the lessee-

(a) to meet the cost of making good the destruction or damage; or

(b) to indemnify the lessor against the cost of making good the destruction or damage;

Due to section 269, Green Inks should be prevented from pursuing Aotea for the building repairs cost.

Plant repairs

The costs associated with plant repairs may be recoverable from Aotea. However, consistent with our conclusion earlier, the ability to recover would depend on whether the plant was considered a fixture of the building. If so, the likely conclusion would be that the plant formed part of the leased premises, or part of the land on which the leased premises are situated. If this is the case, damage to the plant would not be recoverable from Aotea (due to section 269).

Stock loss

The stock loss should remain recoverable from Aotea even with the PLA regime in place. If our conclusion that the PLA regime only covers damage to real property is correct, stock loss falls outside the ambit of the PLA regime. Business stock is undoubtedly personal property as it is not a fixture to the land. Green Inks' normal rights of recovery for stock loss should remain unaffected by the PLA regime.

Loss of rent

Loss of rent is a loss that is consequent upon the damage to the building. Section 269(1)(c) provides that the lessor must not require the lessee 'to pay damages in respect of the destruction or damage.' The destruction or damage that section 269(1)(c) is referring to is the destruction of damage to the leased premises or the land on which the leased premises are situated.

The effect of section 269(1)(c) could be that it prevents Green Inks from recovering consequential losses from Aotea. We believe that this is a natural interpretation of the section. The loss of rent, being directly consequential to the damage to the building, would therefore be covered by the PLA regime and not recoverable from Aotea.

Business interruption

Whether the PLA regime prevents Green Inks from recovering business interruption losses from Aotea may depend on whether business interruption losses are considered a consequential loss on the damage to the building. If they arise from Green Inks' trading operations independent of the landlord/tenant relationship, they may well be recoverable.


When considering Leather's claim against Aotea, it is important to remember that the PLA regime only deals with the relationship between landlord and tenant. Tenant­to-tenant relationships remain unchanged.

Therefore, the PLA regime does not remove Leather's rights to recover the stock loss, plant repairs and business interruption losses from Aotea.


Taking the above scenario, up until now we have only considered the PLA regime's effect on the right to recovery from Aotea as a tenant (and its employees). Although the Sheehan decision makes it clear that tenant and employee are equally protected, that is not necessarily the end of the matter. Who is an employee?

For example, owner/drivers are typically set up as self-employed contractors. Being contractors are they therefore not protected? If Cunningham Lindsey leases an office, but employees of its subsidiary Sergon work there, then the Cunningham Lindsey employees seem to be protected but the Sergon employees may not be.

There are many other categories we can imagine, relatives of the employee – their husband or wife visiting. Temporary workers hired from a labour company, and so on.

Harrison J thought it doubtful that 'drafters of the legislation foresaw the resourcefulness of property insurers ... who would attempt to circumvent the statutory intention ... by suing only the lessee's employees'. I wonder if Harrison J in giving his judgment foresees the resourcefulness of these same insurers (and their adjuster) in circumventing his intention.

1. Auckland High Court, Harrison J, 23.12.09

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions