COVID-19 Rent Relief for Commercial Tenants

What happens for commercial tenants who cannot access their premises due to COVID-19 restrictions?

Now out of select committee, the Government is a step closer to shortly introducing temporary legislative rent-relief for commercial tenants who cannot access their premises due to COVID-19 restrictions, and where their lease doesn’t already cover an epidemic situation.

An amendment to the Property Law Act 2007 will imply a term into leases requiring a fair proportion of rent and outgoings to be reduced where the tenant is unable to gain access to all or any part of the leased premises to conduct their business, and the lease does not already provide for rent relief: The “fair proportion” of rent to be reduced will need to be agreed between the landlord and tenant. The implied term is very similar to the “No Access” clause in the current version of the ADLS Deed of Lease.

The amendment will be applied retrospectively from 18 August 2021, being the first day of the current COVID-19 Delta higher alert level restrictions., meaning tenants who cannot access their premises from or after that date can seek rent relief from their landlord until they can again fully access their premises .

The rent reduction, and what is “fair and reasonable” will have to be considered on a case-by-case basis, based on the relevant circumstances of both the landlord and tenant. The relevant circumstances to consider can be numerous and may be unique for each party. If agreement can’t be reached, then the parties will likely be required to mediate (if both parties agree) or arbitrate to determine the ‘fair’ rent relief. The Government will pay up to $6,000 for the arbitration costs, but this won’t include cover for any parties’ legal costs (it is not yet clear what mediation costs will be covered).

The amendment won’t apply if the landlord and tenant have previously reached agreement over rent relief (presumably where such agreement includes the period after 28 September). While a written and signed agreement will be clear evidence of agreement, there could well be situations where landlord and tenant have come to an understanding or arrangement but this hasn’t been documented, or where rent has by agreement been deferred rather than reduced, and it’s not clear whether these would prevent the new rent relief provisions applying.

If you are a landlord or a tenant, we can help guide you through the new law and its requirements.

Jonny Pow
jonathan.pow@tp.co.nz
021 070 2068

Matt Davidson
matt.davidson@tp.co.nz
021 841 231


IMPORTANT: The information in this article is of a general nature only and does not constitute legal advice. Tavendale and Partners do not accept any liability for any reliance placed on the information contained in this article and shall not be liable to you or anyone else for doing something, or omitting to do something, on the information provided above.