The doctrine of frustration, commercial leases and the Canterbury earthquakes

The Canterbury earthquakes in 2010 and 2011 had a significant impact on landlords and tenants of commercial buildings in the city of Christchurch. The devastation wrought on the city was so severe that in an unprecedented response to this disaster a cordon was erected around the central business district for nearly two and half years while demolition, repairs and rebuilding took place. Despite the destruction, not all buildings were damaged. Many could have been occupied and used immediately if they had not been within the cordoned area. Others had only minor damage but repairs to them could not be commenced, let alone completed, owing to restrictions on access caused by the cordon. Tenants were faced with a major problem in that they could not access their buildings and it was likely to be a long time before they would be allowed access again. The other problem was uncertainty about the legal position as neither the standard form leases in use, nor any statute, provided for issues arising from an inaccessible building. The parties were therefore uncertain about their legal rights and obligations in this situation. Landlords and tenants were unsure whether tenants were required to pay rent for a building that could not be accessed or whether they could terminate their leases on the basis that the building was inaccessible. This thesis looks at whether the common law doctrine of frustration could apply to leases in these circumstances, where the lease had made no provision. It analyses the history of the doctrine and how it applies to a lease, the standard form leases in use at the time of the earthquakes and the unexpected and extraordinary nature of the earthquakes. It then reports on the findings of the qualitative empirical research undertaken to look at the experiences of landlords and tenants after the earthquakes. It is argued that the circumstances of landlords and tenants met the test for the doctrine of frustration. Therefore, the doctrine could have applied to leases to enable the parties to terminate them. It concludes with a suggestion for reform in the form of a new Act to govern the special relationship between commercial landlords and tenants, similar to legislation already in place covering other types of relationships like those in residential tenancies and employment. Such legislation could provide dispute resolution services to enable landlords and tenants to have access to justice to determine their legal rights at all times, and in particular, in times of crisis. STATEMENT AS TO PRIOR PUBLICATIONS During the course of my enrolment as a doctoral student the following parts of my thesis have been used as stated: 1. Parts of Chapter Five that deal with the meaning of the term "untenantable" and the Property Law legislation have been used in a Conference Paper: Collins, T (2014) The Interplay between Commercial Leases and the Property Law Acts in the aftermath of the Canterbury Earthquakes Bond University, Gold Coast, Australia: 12th Australasian Property Law Teachers Conference: Pushing the Boundaries in Property Law, 17 19 July 2014. 2. Parts of Chapter Seven that reveal some of the problems that arose for commercial landlords and tenants after the earthquakes have been published in a Chapter of a Book: Collins T "The Problems Encountered by Commercial Landlords and Tenants after the Canterbury Earthquakes" in Jeremy Finn and Elizabeth Toomey (eds) Legal Response to Natural Disasters (Thomson Reuters, Wellington, 2015) 3. Parts of Chapter Four that deal with registered commercial leases have been used in a Conference Paper: Collins, T (2016) Registered Leases and the In Personam Claim University of Canterbury, Christchurch, New Zealand: 13th Australasian Property Law Teachers Conference: Protecting Property through Legislative and Technological Change, 14 15 April 2016. Except as stated above, the text of this thesis has not been published in any form prior to its submission for examination. Except for materials quoted and attributed to their authors in footnotes or the Bibliography, this thesis is entirely my own work.