Further changes to the Property Law Act affecting commercial leases
The Minister for Justice, Hon Andrew Little, has announced a package designed to assist small businesses struggling to meet fixed costs (e.g. rent) due to the loss of revenue caused by COVID-19. The legislative provisions are not yet available - this article is based on the minutes of the cabinet committee decision.
Proposed changes
The package involves changes to the Property Law Act 2007 which will:
imply a clause into commercial leases that meet eligibility criteria (see below) 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;
provide 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 fairly proportioned;
provide 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; and
require any disputes under the implied clause to be settled in arbitration.
Eligibility criteria
For the implied clause to apply, the following eligibility criteria must be met:
the business must have 20 or fewer full-time equivalent staff per lease site;
the business must be New Zealand based; and
the business must not have already come to an agreement for a rent abatement with their landlord.
When will these changes apply?
These changes will have retrospective effect. They will apply from 4 June 2020 (being the date of the policy announcement) until 6 months after the changes are enacted.
More information
The minutes of the cabinet committee decision are available here.
If you have any questions or would like advice in respect of how these changes may affect you, please contact your usual point of contact at Kemps Weir or contact us here.
Disclaimer: This publication should not be construed or acted on as legal advice. It is brief and general in nature. Specific advice should be sought.