Sledgehammer approach: Landlords and tenants divided over rent relief bill

Government moves to “improve rent relief measures for landlords and tenants” has been met with a divisive response.

Minister for Justice Kris Faafoi today announced a new Bill designed to improve commercial rent relief measures for landlords and tenants affected by Covid-19 restrictions.

“We are aware that many lease agreements already have provision for adjusted rent payments during an epidemic emergency, and many landlords and tenants have been able to negotiate agreed rent relief terms between themselves as a result of previous lockdowns,” Faafoi said.

The changes introduced to the Bill will include a requirement to consider a commercial tenant’s loss of income in determining what a “fair proportion” of rent relief would be.

The Response (Management Measures) Legislation Bill hasn’t passed through the Parliament yet.

Retail NZ and Hospitality NZ have welcomed the proposed Bill but the Property Council NZ is heavily against it.

Property Council New Zealand chief executive Leonie Freeman said the Government was using a “sledgehammer to a nut” – and it wasn’t helpful to landlords and the property owners.

“This has been a rushed Bill with no initial consultation with the key stakeholders – namely property owners and tenants,” she said.

The Government has shown a lack of understanding believing that the property owners have given rental relief only with a “no access” clause in the lease, she said.

The reality has been that most property owners have generally provided rental relief based on who needs it, she said.

“By the Government’s own admission they don’t know the size and scale of the problem. Their approach of taking a sledgehammer to a nut does nothing to solve the root cause of the problem – cashflow – and is of benefit to the lawyers.

“We do support the tweak to the bill announced today, which says that a fair proportion of rent deduction must include loss of income experienced by the lessee. They will ensure that the rent relief measures should target those who desperately need it and not those who don’t.

“The team of five million works when we are fixing problems together. Pitting landlords and tenants against each other like this is divisive and only serves to cause more strain and hardship when New Zealanders right across the country are doing it tough,” Freeman said.

Justice minister Kris Faafoi said the Government had landed on a “balanced package” of changes to improve rent relief measures for landlords and tenants affected by Covid-19.

He said the Bill would offer “support measures” particularly for small to medium business that had been hit hard by the restrictions.

“We are aware that many lease agreements already have provision for adjusted rent payments during an epidemic emergency, and many landlords and tenants have been able to negotiate agreed rent relief terms between themselves as a result of previous lockdowns.

“In providing this support, we are also incorporating changes suggested by landlords and tenants to the Finance and Expenditure Select Committee. The changes will provide additional clarity and options for landlords and tenants to agree a fair proportion of rent to be paid where Covid-19 restrictions have impacted a business’s ability to operate,” Faafoi said.

The changes introduced to the bill will include a requirement to consider a commercial tenant’s loss of income in determining what a “fair proportion” of rent relief would be.

“This change protects against the new rent relief provisions being used where a commercial tenant has not actually had any serious loss of income as a result of lockdown restrictions because, for instance, they have been able to continue operating from home.”

Last month the Herald reported that a group of major New Zealand property companies had pleaded with the Government to amend its surprise lease law changes, hinting at a willingness to offer a deal that covers retail and hospitality businesses.

Then Faafoi announced the Government was making an immediate change to the Property Law Act which will insert a clause into commercial leases requiring a “fair proportion” of rent to be paid where a tenant has been unable to fully conduct their business in their premises because of the Covid-19 restrictions.

Retail NZ chief executive Greg Harford said the Bill was “sensible” and it was great news.

Retail NZ has been asking the Government to make changes to the Bill to better support business in need of rent relief, he said.

“The changes agreed to by the Government today will be welcomed by retailers around the country. Backdating the rent relief clause to the start of the most recent lockdown will ensure rent relief can be sought in the most financially crippling alert level 3 and 4 periods.

“A significant number of retail businesses are in dispute with their landlords around rent relief relating to the current lockdown. The Government has taken onboard feedback from Retail NZ and is making sensible changes to strengthen the Bill.

“The package of changes from the Government supports retailers and landlords to conduct negotiations on rent relief with clear guidance and support – something we have been asking the Government for and it has heard. Retailers across the country can now get on with negotiating rent relief with landlords.”

Hospitality NZ chief executive Julie White also welcomed the rent relief support announcement, which is currently being passed through the Parliament.

“We are delighted with the decision to backdate the rent relief clause to the start of the current lockdown, ensuring hospitality businesses can seek rent relief during the most recent alert levels 3 and 4,” she said.

“As we know, as soon as the country enters a lockdown, the impacts on the hospitality sector are immediate, with both zero revenue and stock losses hitting the bottom line.

“That’s why the ability to negotiate during the recent level 3 and 4 periods across the country was a critical change that needed to be made for the proposals to be effective,” White said.

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