Hamish Rutherford: A couple of holdouts does not justify Government by fiat


Justice Minister Kris Faafoi’s surprise announcement that the Government will make a temporary change to the Property Law Act shows how different governing is compared to just a year ago.

Through the middle of 2020, Labour and New Zealand First locked horns over plans to force commercial rent relief on the market. The plans were announced, blocked, watered down and changed before they eventually fell over, in the rough and tumble of coalition politics.

With lobbyists pushing the interests of clients on both sides, a flow of leaks about negotiations and ministers being forced to water down their statements (Jacinda Ardern described some landlords as “vulnerable”), it was an embarrassing episode for both parties.

There was no time for anyone to debate the merits or otherwise of rent relief this time around. Faafoi’s office released news that temporary changes to the law would be made as the Justice Minister was already speaking to reporters on the way into Parliament. He actually alerted them to the release.

He has not responded to interview requests since, but in his only brief comments on the matter appeared to admit that he did not know how much of a problem difficult landlords are.

Most leases include provisions around what to do if a tenant cannot access their building and many others had struck deals voluntarily. Beyond that, Faafoi mused that he understood there were “essentially, a couple of holdouts” that had not reached agreements.

Unless he was making a joke it seems weak grounds on which to insert the Government’s sense of fairness into contract law.

In a sense, this year’s move is cleaner, but by no means is it good governance.

Not only did Faafoi fail to consult industry, he actively ignored it. Leonie Freeman, chief executive of Property Council New Zealand wrote to Faafoi early in the latest lockdown offering its members as sounding boards for policy development.

Freeman is still waiting for a response. While the industry would clearly lobby vigorously for the interests of its members, it is an industry worth tens of billions of dollars.

The Property Council is not the exception. Both Retail NZ and Hospitality NZ, the peak bodies for two industries most affected by lockdowns, welcomed the move, but admitted that it came as a complete surprise.

Both had raised the issue of rent relief with the Government but neither had any inclination that a law change, inserting the Government’s will into contracts across the country, was coming.

Last year’s untidy attempt to offer compensation appeared to teach the Government that not all landlords were as wealthy as they might have assumed. In many cases the landlords were in a less powerful position than their tenants.

Although the move has been framed in the interests of fairness, the issue is more complicated than it might seem.

The Government is not proposing to force banks to offer concessions on loans, councils to reduce rates or insurance companies to reduce premiums. Forcing rent relief is choosing one of a number of problems and forcing that problem on to someone else.

But worst of all is not the policy itself, but the message this sends. The Government is happy to make complex policy decisions in secret and act without outside help or advice.

Time and again political observers have warned that Labour is prone to close ranks when it faces complex problems, make decisions based only on input from those within the Beehive then be forced to try to push through bad policy because it has already announced the decision.

It does further damage to New Zealand’s reputation as a stable operating environment because investors perceive that the rules may change with little notice or research.

Last year’s rent relief saga might have exposed the ugly side of coalition politics, but this week’s act of government by fiat does little to inspire confidence in the decision-making process.

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