Under the new clause, a fair reduction in rents must be made if a business has lost revenue due to COVID-19
The New Zealand government has announced a temporary amendment to the Property Law Act to help resolve commercial rent disputes that have arisen due to the COVID-19 pandemic.
“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,” Justice Minister Andrew Little said.
He said that the need for fairness between both parties has precipitated the government’s movement “to ensure there is appropriate rent relief, with the burden shared by landlords, tenants, and the Crown.”
The new clause to be included in the Property Law Act requires a fair reduction in rent to be made if a business has lost revenue as a result of the pandemic. Changing the act had initially been discussed as a relief option in late April.
In addition, the government is investing up to $40m in a package that offers timely and cost-effective access to arbitration, helping SMEs to reach a consensus with landlords on what constitutes fair rent.
“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,” Little said.
The package, he said, would 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.”
Little outlined the criteria that a business must meet in order to be eligible for the government package:
- It must be based in New Zealand
- It should have 20 or less full-time staff at each leased location
- It must have failed to reach an agreement with the landlord on a COVID-19 response measure
He said that the package “provides for flexibility of outcomes, and will provide a subsidy of up to $6,000 per arbitration” to an eligible business.
“This means, in many cases, the Crown will cover about 75% of the arbitration cost,” Little said.
The amendment came into effect on Thursday.