Help to resolve commercial rent disputes

Justice Minister Andrew Little.

The Government will legislate to ensure businesses that suffered as a result of the COVID-19 response will get help to resolve disputes over commercial rent issues.

A temporary amendment to the Property Law Act will insert a clause in commercial leases requiring a fair reduction in rent where a business has suffered a loss of revenue because of COVID-19.

The package will invest up to $40 million in providing access to arbitration in a timely and cost-effective way to support small or medium businesses to reach agreement on a fair rent.

“I am concerned that some landlords and tenants are not coming together to make agreements that reflect the seriousness and uniqueness of COVID-19, including behaviour where large commercial tenants refuse to pay rent, and landlords demanding rent from small retailers who haven’t been able to operate,” says Justice Minister Andrew Little.

“What is required is fairness between commercial tenants and their landlords. That is why the Government is moving to ensure there is appropriate rent relief, with the burden shared by landlords, tenants, and the Crown.”

To be eligible for the implied clause a business needs to have 20 or fewer full-time staff at each leased site and be New Zealand-based.

However, where businesses and landlords have already been able to reach agreement in response to COVID-19, they will not be able to use the new process.

The package will also provide guidance on applying the implied clause about a ‘fair proportion’ and requires that disputes about the implied clause be settled through a compulsory arbitration process in a timely and cost-effective way.

“The package provides a way of helping businesses that are facing a severe loss of revenue, through no fault of their own, as a result of COVID-19 and will provide them with some certainty around commercial rent agreements," says Andrew.

“The package provides for flexibility of outcomes, and will provide a subsidy of up to $6,000 per arbitration. This means, in many cases, the Crown will cover about 75 per cent of the arbitration cost.

“The changes will apply from today, and I encourage businesses and landlords to work towards reaching a fair agreement on the payment of rent."

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What about non-profits?

Posted on 04-06-2020 16:22 | By jed

What about non-profits? Not every building is a commercial operation. Some landlords are very wealthy and others might go bankrupt if a single rent payment is missed. The financial circumstances of the landlord and tenant should be considered and any solution should cause least overall harm.

Good luck with that

Posted on 04-06-2020 11:34 | By Kancho

Well quite a queue forming for mediation I would think. Sad but landlords also need to keep afloat so need rents to cover investment and mortgages too. Not sure why mediation for business but not for homeowners who can’t now cover mortgages with banks either. If I were a commercial landlord I would want a lot of convincing that the business if viable as forgoing rent is pointless if the occupants go bust anyway further down the track. Survival is an issue for businesses, landlords and home owners with mortgages equally so why single out only one ?