Rent Relief for Commercial Tenants – will we be as brave as the Aussies?

Rent Relief for Commercial Tenants – will we be as brave as the Aussies?

Our government has recently announced that it is the process of putting together a rent relief package for commercial tenants and it could not come soon enough.

Right now, many commercial tenants and landlords are at odds over what should happen if, due to the Covid-19 lockdown, a tenant is unable to access its premises to be able to conduct its business. And there is no easy answer, even if the lease is the form of the Auckland District Law Society Lease with the famous clause 27.5. This is a clause which provides that only a fair proportion of rent is to be paid if a tenant is prevented from accessing its premises to fully conduct its business due to an emergency (being the Covid-19 pandemic). There are arguments over what exactly a fair proportion of rent is. Then there are the leases which do not have any equivalent to clause 27.5 and where some landlords are demanding full rent and outgoings even if the tenant is unable to fully conduct its business from the premises.  All of this results in landlords and tenants having to incur legal costs at a time when this is probably the last thing they need. Times are stressful enough right now for businesses.

On Tuesday, the Australian government announced a rent relief package for commercial tenants. We understand that this consists of a new mandatory code of conduct which would be binding on landlords and tenants who were eligible for the Jobkeeper Program (their equivalent of our Wage Subsidy offer) and have a revenue of less than $50 million.

Under this Code:

  1. Landlords are prohibited from terminating a lease or drawing on a tenant’s security.
  2. Rent is to be reduced to coincide with falls in the tenant’s revenue and this would be applied in the form of waiver of rental or a deferral of rent.
  3. Any wavier of the rent must account for at least 50% of the rent reduction and any deferral of rent was repayable over the remaining term of the lease (subject to a minimum term of 12 months).
  4. Landlords are also prohibited from increasing rents, enforcing penalties for tenants who have ceased trading or reduced their trading hours, charging interest on unpaid rent.

The changes are aimed at forcing landlords and tenants to share the burden and come to an agreement. Banks are also expected to provide assistance to landlords.

While we wait for our Government to make its announcement on rental relief, one can only hope that they are as brave if not braver than its Aussie counterpart.

If you need help with your commercial lease – contact Lizandra Bailey, 021774 333 or lizandra@turnerhopkins.co.nz

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