Relief for commercial tenants

The Government just released guidance today for eligible commercial landlords and tenants who have not yet resolved what, if any, rent or outgoings abatements are fair to both parties as a result of the impact of COVID-19 on business. For more information, see Janice’s summary below and, read the Government’s press release, here

Summary

The Government has today issued their response to the problem of commercial rents during the COVID-19 epidemic. The Cabinet Economic Development Committee Minute of Decision and Memo are available here

The effect of this is that:

1. There is to be a new clause implied into leases of businesses that meet eligibility criteria that requires that a fair proportion of rent and outgoings cease to be paid when a tenant’s business has suffered a material loss of revenue because of the restrictions put in place to combat COVID-19. The exact wording of the implied clause is to be finalised during the drafting of the Bill, but is anticipated to be similar to the “No Access in Emergency” clause in the ADLS Sixth edition of the Lease released in November 2012, introduced following the experiences of the Canterbury earthquakes.
2. The criteria to be eligible is:
   1. The business must have 20 or fewer full-time equivalent staff;
   2. The business must be NZ-based; and
   3. The business must not have already come to an agreement for rent abatement with their landlord.
3. There will be clear rules that must be followed when determining what factors must be considered in determining a fair proportion, based on the principles that the interests of the landlord and the tenant should both be taken into account, and the financial burden of COVID-19 must be fairly proportioned.
4. There will be clear guidance on what other measures parties may agree to as a temporary change to support them both through the pressures caused by COVID-19.

Arbitration is to be used (with a subsidy available to access it) for any disputes.