Government moves in the commercial leasing space
Government moves in the commercial leasing space.
On 4 June 2020, the Government announced that it will make temporary changes to the Property Law Act 2007 (“PLA”) that will insert implied clauses in commercial leases requiring a fair reduction in rent where a business has suffered a loss of revenue because of Covid-19.
Businesses that are eligible to have the clause implied into their commercial lease must meet the following criteria:
a. The business must have 20 or fewer full-time staff per lease site; and
b. the business is New Zealand based; and
c. the business has not already come to an agreement for rent abatement with their landlord.
The amendment to the PLA will also provide clear rules that must be followed when determining what factors must be considered in determining a fair proportion of rent reduction, based on principles that the interests of the landlord and the tenant both be taken into account and the financial burden of Covid-19 fairly proportioned.
Disputes under the implied clause will be settled in arbitration and the Government will further support the parties to access arbitration in a timely and cost-effective manner.
In our experience, as the majority of commercial leases already include clauses which set a framework for rent concessions for situations like Covid-19 or the parties have already negotiated a fair reduction of rent, this may be a matter of “too little, too late”. However, it may assist those landlords and tenants that have not already been able to reach agreement between themselves.
If you have any queries, or we can be of assistance, please contact our commercial team.