Government package for commercial leases too little, too late


Property Council New Zealand and the New Zealand Council of Retail Property have voiced concerns over the Government’s proposal to intervene in the industries contractual relationships

“The announcement of a commercial rent dispute process is too little, too late for a majority of landlords and tenants”, says Property Council chief executive Leonie Freeman.

“For many property owners and tenants, this is less a support package and more a dispute resolution option that has come two months too late to have much impact. Our members tell us that over 80% of landlords and tenants have come to an agreement over rent relief, making this proposal largely redundant.

“While the arbitration component may be helpful for those who have not concluded negotiations, in reality this decision has taken far too long and has had little (if any) industry consultation”, says Freeman.

“The devil will be in the detail, with much of the intricacies of this announcement still to be clarified. For example, what constitutes a “small landlord” and does this package include large businesses who have multiple sites with less than 20 full time employees? There are many questions that remain unanswered at this stage.

“The intent of the recommendations to support small businesses is understandable, however, it fails to actually target them. Many larger businesses will be captured under the current proposals as they will often have fewer than 20 FTE’s per site.

“Small businesses need three things: cash, time and certainty. While today’s announcement offers a path to arbitration for those who need it, we still believe that a straight rent relief package such as the one we presented to government in early April would have had greater affect.

“We hope that landlords and tenants now have the certainty needed to settle any remaining negotiations and move on to recovery mode. We’ve been a team of 5 million during lockdown, now that same team of 5 million must band together to support those businesses who have suffered during this period”, says Freeman.

New Zealand Council of Retail Property Chair Campbell Barbour says “the Government’s proposal comes far too late after the industry has largely got on with the job of coming to individually negotiated positions over recent months.

“We are concerned that the industry now faces a protracted government imposed and funded arbitration process to amend commercial contracts when our collective interests should be getting back to the difficult business of retail.

“Our sector went to government early with a proposal to assist the industry to manage through the lockdown period, which involved sharing the burden between property owners and tenants. The Government has failed to respond, instead offering now, months later, to fund disputes.

“We are not aware of any other industry sector where the Government has decided to alter contracts between commercial parties, property owners haven’t been provided a mechanism to arbitrate to reduce their interest with the bank or the rates on their property with the council.

“To legislate to retrospectively alter contractual provisions in this way is unchartered territory in New Zealand. The sanctity of commercial contracts is a cornerstone of our country’s legal system.

“While we understand the Government is trying to provide a pathway to arbitration for those tenants and landlords who are yet to come to an agreement on rent relief, this proposal is fraught with difficulties”, says Barbour.

“We have concerns surrounding the definitions within the proposal which we understand to be tightly focused on small New Zealand businesses,

“While a business with 20 full time equivalent employees or less might be a small office, in retail – a sector made up of largely part time employees – a single store with less than 20 full time staff encompasses nearly all retail tenants.

“The industry needs more clarity on what constitutes a ‘New Zealand based business’ and how long landlords would be expected to provide relief to commercial tenants.

“We are not aware of any consultation with our industry surrounding the proposal and reconfirm that our door is open to government with regards to refining it.”

“Our members implore the Government to work with the property sector to ensure the legislation will achieve its intended purpose and target small businesses”, says Barbour.