NZ House upgrade required - Treasury

New Zealand has no option but to carry out a $150 million upgrade on New Zealand House in London because of details in the lease agreement, Treasury says.

New Zealand House, an 18-storey building near Trafalgar Square, houses several government agencies and New Zealand businesses.

New Zealand's Treasury holds a 99-year lease for the building which ends in 2048.

As part of the lease New Zealand is required to maintain the building to a high standard which generally means a major upgrade every 20 years, Treasury spokesman Bryan McDaniel told NZPA.

And it is due for an upgrade.

The 2009 budget listed the building as an "unchanged quantified risk" requiring $150m in capital between 2009/10 and 2013/14.

The amount was also listed in the previous budget.

Mr McDaniel said the Crown did not own the building freehold but rather leased it with the right to charge rent.

But when the lease expires the land and buildings will go back to the United Kingdom's crown estate.

Former foreign affairs minister Sir Donald McKinnon said Treasury has in the past recommended selling the building but he thought it was "ridiculous".

"It is a very good landmark in London.

"It would be a very bad decision to sell it," he told The Dominion Post.

- NZPA