The Government has announced that it will be making temporary legislative changes to help commercial tenants who have been affected by Covid-19 obtain a fair reduction of rent and outgoings for their commercial leases.

Many businesses have suffered a loss of revenue as a result of the Covid-19 pandemic, which has affected their ability to pay rent for leased commercial premises.  While some tenants and landlords have been able to reach agreement on a temporary reduction in rent, a lot have not.

Not all tenants have a contractual right to decreased rent in an emergency such as this, which has led to disputes between landlords and tenants, with some tenants unable to, or refusing to, pay rent.

The temporary law change will insert a clause into commercial leases that provides for a fair reduction in rent and outgoings, where eligible businesses have suffered a loss of revenue due to Covid-19. 

The rent reduction clause will be available to New Zealand-based businesses, with no more than 20 full time staff at each leased site, who have suffered a loss of revenue as a result of Covid-19 but have been unable to agree on a rent reduction with their landlord.  

Businesses who do not meet the eligibility criteria or who have already reached an agreement with their landlord will not be able to use the clause.

The temporary law change will set guidelines for determining a fair reduction.  It will also include support for resolving disputes between landlords and tenants by arbitration, including a $6,000 subsidy for towards the costs of arbitration.

The changes applied from the date of the Government’s announcement (4 June 2020), and will apply for six months after the legislation passes the Parliamentary process.

Commercial tenants and landlords who are having difficulty meeting their obligations, or are in dispute about the terms of their lease, should seek legal advice as a matter of priority.  Legal advisors will be able to provide situation-specific advice about the applicability of this temporary law change.

Claire Tyler