Government to Legislate for Commercial Rent Relief

Commercial leases
COVID-19 (21?) Commercial leases – Rent, to pay or not to pay, that is the question
September 21, 2021
A new pathway to residence for work-related visa holders in New Zealand
September 30, 2021
Show all

The Government has announced today that it will pass law to help commercial tenants obtain rent relief if they are affected by covid-19 lockdowns. 

If the Bill is passed in its current form, then:

  1. The law changes will have effect from today (regardless of when the Act passes).  As with many other covid-19 response measures, the law changes will come to an end when the Government’s Epidemic Preparedness Notice expires or is revoked.
  2. The law changes will apply to all leases, unless:
    • the lease already includes a ‘no access in emergency’ clause covering epidemics – such as the familiar ADLS clause 27.5; or
    • the landlord and tenant:
      • have already (prior to 28 September) agreed to vary the rent and/or outgoings during any rental period which would otherwise be covered by the Bill; and
      • were prompted to come to that agreement because of the tenant (or any subtenant) not being able to access all or part of the premises to fully conduct their business operations, due to health and safety reasons related to the epidemic; or
    • the parties to the lease agree that the new law won’t apply, but only if that agreement is made after 28 September 2021.

If any of (2) above describe your situation, then the rent relief provisions described below won’t apply.  However if none of these describe your situation, then read on.

  1. For so long as a tenant (or subtenant) is unable to fully access their premises to fully conduct their business operations in the premises, due to health and safety reasons related to an epidemic, then a ‘fair proportion’ of the rent and outgoings will cease to be payable.  In the past, some landlords argued that if a tenant had access to some of the premises (even if not all of it), then the rent relief provisions contained in ADLS lease clause 27.5 did not apply.  That argument won’t be possible if a tenant is claiming under the new law.
  1. The ‘fair proportion’ of rent/outgoings to be deducted, must be agreed between the parties.  It must take into account any rent relief provided between 18 August 2021 and 28 September 2021 because of access restrictions relating to the epidemic.  This will be a key negotiating point between landlord and tenant.
  1. Any dispute regarding the rent relief provisions must be submitted to arbitration (unless the parties agree something different).
  1. No enforcement action can be taken against a tenant for not paying rent during the effective period of the Bill, if the action is inconsistent with the rent relief provisions in the Bill.  In particular, no action can be taken if the parties have not yet agreed the ‘fair proportion’ of rent/outgoings to be deducted.  Similarly, the result of any court or similar process must not be inconsistent with the new law. 

Many commercial leases don’t contain the rent relief provisions included in clause 27.5 of the current version of ADLS lease.  Even if the parties to those leases agreed upon rent relief for the lockdowns in 2020, they might not have agreed any relief for the current lockdown.  If you don’t have rent relief provisions in your lease and don’t have anything agreed for the current lockdown, the new law will almost certainly apply to you and you should speak to us.

Michael Bright

Director

Gaze Burt

michael.bright@gazeburt.co.nz

Michael Bright
Michael Bright
Partner

Leave a Reply

Your email address will not be published.