The Government has announced it will insert a temporary amendment to the Property Law Act to ensure businesses which suffered as a result of the COVID-19 response will get help to resolve disputes over commercial rent issues.

A clause will be included to cover commercial leases requiring a fair reduction in rent where a business has suffered a loss of revenue during lockdown.

Justice Minister Andrew Little says 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 Mr 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 Cabinet Paper and Minute has been proactively released by Mr Little and is included in this link.