Sun. Feb 5th, 2023


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Frustrated at lack of official guidance on lease changes, Property Council ‘fills the void’

3 min read

The Property Council has published its own guidelines on how to interpret new legislation about commercial rent relief because the Ministry of Justice is yet to do so.

Retail advocate Retail NZ said it does not necessarily agree with the Property Council’s interpretations of recent law changes, but will engage with the landlord body amid frustration at the lack of official guidance.

At the start of the month changes to the Property Law Act came into force which inserted an implied clause into all commercial tenancy leases which did not already have one covering the circumstances under which rent relief will be offered if a tenant cannot occupy their premises.

Both property and retail representative groups were surprised by the moves. The legislation was passed into law in a matter of weeks, meaning tenants covered by the changes were entitled to a “fair proportion” of rent relief.

But the legislation did not include any guidance on what a fair proportion was, or how it should be calculated.

Although Justice Minister Kris Faafoi and the Ministry of Justice have promised to provide guidelines, so far nothing has been released.

Leonie Freeman, chief executive of Property Council New Zealand, said the law required that where one party commenced communication about rent relief, the other was required to reply within 10 working days.

With the legislation coming into force on November 2, Freeman said the 10-day period had now passed, meaning parties which tried to kick off talks immediately were now obliged to begin negotiating.

Despite sending a string of letters to Faafoi offering input on the guidelines and requests for updates to the Ministry of Justice, she had no idea whether guidance was coming.

“We’ve been chasing for weeks and we haven’t had any further information or communication,” Freeman said.

Both landlords and tenants had been in contact with the council telling it “we don’t know what to do, we’re stuck in a void, we don’t know how to progress things,” Freeman said.

In an attempt to provide clarity, the Property Council has released its own draft guidelines about what it thinks should be taken into consideration when assessing how much relief should be provided.

She acknowledged the situation was unusual and that the framework had no legal standing. It had been sent to other affected parties and was described as a draft.

“We’re trying to put out a framework and do something positive, rather than spend weeks chasing the Government to see if we can help, or at least where it’s up to,” Freeman said.

Greg Harford, chief executive of Retail NZ, said he had been sent a copy of the draft guidelines. He did not necessarily agree with the guidance but said Retail NZ wanted to meet with the council. He was also frustrated by the delay to the official guidance.

“It’s critical that there’s some sort of official guidance from the Government on this and I think in the absence of that, you’re going to have organisations like the Property Council that will come out with their view of the world, we have our view of the world, and it doesn’t help anybody.”

Harford said it was clear that there is confusion about what should be taken into account when deciding the level of rent relief that should be applied.

“I’m aware that there are landlords that are demanding 12 months’ worth of financial statements from the tenants,” Harford said.

“That’s not relevant,” he added, saying the only applicable period was since New Zealand went into lockdown on August 17.

In a statement Faafoi said the ministry was “in the process” of drafting guidelines, which would be published no later than December 3. “There is no obligation on affected parties to wait … and I urge parties to reach their own agreement.”

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