A return to business as unusual
As the immediate rush of the pandemic has eased, as of early June 2020 we have returned to our regular publications and alerts.
To see the latest news and updates, please click here.
9 June 2020
Guidance for commercial leases and mortgages during COVID-19
On 4 June 2020, the Government announced further temporary measures to be enacted to specifically support small New Zealand businesses through the effects of the COVID-19 epidemic. Parties to many smaller-scale commercial leases will be required to negotiate the payment obligations to ensure a fair rent is agreed. Negotiations can be conducted in any way agreed by the parties, such as through mediation. Remaining disputes must be resolved through arbitration. The Government will subsidise streamlined arbitrations with up to $6,000 including GST per proceeding and up to $40 million in total.
This guidance provides more information about the changes and should help commercial tenants and landlords find an approach that works for both. The Ministry of Justice has prepared this guidance in consultation with the New Zealand Law Society | Te Kāhui Ture o Aotearoa (Law Society).
9 June 2020
Construction sector COVID-19 health and safety standards and protocols updated
Property Council, through the Construction Accord and in collaboration with a range of cross-industry groups, has been working hard to develop and produce a set of protocols that will help keep people safe from COVID-19 when they head back out on site after the lockdown.
These protocols have been designed to provide information to construction businesses on how they can achieve the requirements of the minimum standard for safe operation.
With a new alert level comes new requirements for site work. Construction Health and Safety NZ (CHASNZ) has released level 1 guidance for the building and construction industry. Well done to Chris Alderson and the team at CHASNZ for developing these standards to get the construction industry back on the tools safely and at speed.
COVID 19: Rapidly mobilising construction projects
The Construction Sector Accord has issued new guidance to local and central government agencies on getting construction projects up and running quickly following the COVID-19 disruption. One of the focus areas for the COVID-19 Response Plan is to rapidly mobilise projects to support jobs and businesses in the sector, and boost New Zealand’s economic recovery.
30 April 2020
Bell Gully: What could the latest proposed changes to the Property Law Act mean for landlords and tenants?
Author: Bell Gully
The government announced yesterday that it is considering making changes to the Property Law Act 2007 in order to assist New Zealand businesses with rent payments.
It appears that the changes will mean that owners will be required to consider rent concessions for smaller businesses where COVID-19 has had a material impact on turnover. It also appears that the arrangements may be similar (at least in part) to those in the “Code of Conduct for Commercial Tenancies" produced by the Australian government and to be implemented in each Australian state and territory.
The Australian Code imposes mandatory good faith leasing principles for commercial leases where the tenant has an annual turnover of no more than AU$50 million. A rent reduction must be offered based on the tenant's decline in turnover during the COVID-19 pandemic period and the subsequent “reasonable recovery period". The reduction can be a mixture of waiver and deferral arrangements, but at least 50 per cent (and sometimes more) of the reduction must be a waiver. There are also restrictions on the landlord terminating the lease, implementing a rent review or drawing on the tenant's lease security during that same period.
If a similar Code of Conduct is enacted in New Zealand the key question will be whether it will apply retrospectively, as many landlords and tenants have already negotiated rent arrangements to apply during some or all of the lockdown period. These negotiated arrangements might be more favourable to one party than those specified in the Code of Conduct. In addition many New Zealand leases (unlike Australian leases) contain a “non-access clause", allowing the tenant to pay a reduced rent during some of the lockdown period. Will the Code of Conduct override those contractual provisions?
19 May 2020
Kāinga Ora updates
Kāinga Ora has for the last month sent weekly bulletins, outlining their COVID-19 response, to around 500 external build, supply and development partners. The latest two bulletins are below:
- Development and Construction Matters - 15 May 2020
- Development and Construction Matters - 1 May 2020
- Development and Construction Matters - 24 April 2020
2 May 2020
Poor form from business associations
Late last week we were made aware of two open letters sent by the Hospitality Association, EMA, Auckland Chamber of Commerce, BusinessNZ (which includes the Canterbury Employers’ Chamber of Commerce, Business Central and Employer Otago Southland), the Franchise Association of NZ, RetailNZ, the Baking Industry Association and the Restaurant Association, which called for a mandated Code of Conduct for Commercial Leasing.
The letters (available here) effectively pitted one sector against another, providing inflammatory comments that lacked context. Of particular disappointment was the fact that we have enjoyed partnerships with many of these associations in the past, with a significant number of our members also paying membership fees to these entities. By releasing these open letters, these organisations have forsaken one part of their membership for the other, louder voice.
As ‘the voice of business’ they seem to have forgotten that property owners are businesses too.
In response to this, we fired off a media release and wrote to BusinessNZ, EMA, RetailNZ and Auckland Chamber to express our disappointment at their lack of consultation. We have also written to the Prime Minister to provide a counter argument to the letter and redirect her attention to our original proposal, which would have seen both tenants and landlords offered support.
The truth is, this last-ditch attempt to encourage Government action is unlikely to have much effect as landlords and tenants have already started, and often completed, negotiations.
The only thing this group have achieved is to ensure we consider our partners very carefully in future.
Local Government increase in debt could fund COVID-19 recovery
Recently, we wrote to the Minister of Local Government Hon Nanaia Mahuta sharing our concern that local government needs to take on more debt, but in many cases are close to reaching their debt limits. We urged the Government to consider raising debt levels for local government. This would ensure debt could be used for capital expenditure so that key infrastructure projects continue to progress in order to maintain the workforce that is needed in the long-term.
The Ministers response was positive, acknowledging that increased council debt could be a key feature of the recovery. Furthermore, the Minister’s letter confirmed that Local Government Funding Agency and relevant government agencies are actively considering the opportunities and issues around local government debt.
Property Council is supportive of this work. At this time of uncertainty, we must balance the requirement for councils to exercise fiscal responsibility with the need to continue to invest in key infrastructure projects. This message is being reiterated to councils across the country not only through individual letters sent earlier this month, but also in our Annual Plan 2020/21 submissions.
17 April 2020
Our proposals to Government
Far and away the number one question we have been asked of late has been "what did Property Council propose to government in terms of a rent subsidy".
Prior to this week's announcements we have been cautious with our sharing of this document, but today the embargo lifts and we explore what opportunities the Government missed.
In addition to the rent subsidy proposal, our dedicated New Zealand Council of Retail Property (NZCoRP) Committee also spent considerable time drafting a proposal for the safe operation of shopping centres at Alert Level 3.
While it is disappointing to see such incredible, logical and thorough work not result in a positive outcome, it has also been hugely rewarding to watch the working groups and committees in action as we came together to educate the Government on the far-reaching impacts of their decisions.
As the Property Council, we want to extend our gratitude to these companies and individuals and to all those who emailed, called and fed into our submissions in some form.
Government contract guidelines to support industry
Government has implemented the first action from the Accord’s Construction Sector Response Plan and issued guidance and expectations to agencies on managing contracts during the shutdown.
The government recognises agencies working with the construction industry have a strong part to play in ensuring the industry remains viable and can bounce back after COVID-19 restrictions are lifted.
Ministers are directing agencies within their portfolios to follow new guidelines that will ensure cash keeps flowing in the sector to maintain businesses and jobs during the shutdown. The directive is being sent to the chief executives of all agencies engaged in construction and infrastructure projects including ministries, state-owned enterprises, district health boards and tertiary education institutions.
The construction industry is particularly vulnerable at this time due to its dependence on global supply chains and heavy reliance on cash-flow.
The guidance, which was developed by Accord Steering Group members and is supported by Building and Construction Minister Jenny Salesa, focuses on creating a consistent and supportive approach to contracts.
Those who are the designated business administrator for their member company will have recently received an invoice for renewal of your Property Council membership for the 2020/2021 year. We appreciate that this is a difficult time for businesses and expect many members will be evaluating every invoice that crosses their desk. These are the times that membership associations are made for.
Without your support we would not have a seat at the table with Ministers and officials, nor would we have a mandate to speak on behalf of the industry. We call on members to continue to support us at this time and trust that we are doing everything possible to minimise costs whist maintaining services and increasing our advocacy.
Please feel free to drop our Membership Manager Harry Wright a line if you have any questions or queries.
Where does your council stand on a rates freeze?
Councils across the country are scheduled to increase rates by as much as 10% in the coming months, despite the hardships faced by households and businesses in the wake of the COVID-19 lockdown. Property Council wrote to all council's last week calling for reconsideration of increases and requesting that any increase be kept to an inflationary level. Some councils have already responded, with the Bay of Plenty and Hawkes' Bay Regional Council's both making announcements.
The Taypayers' Union have published a live dashboard for the public to find out where their local and regional council stands on rates freezes.
Rent payments during lockdown
Jane Holland of Bell Gully gives an overview of the potential impact for landlords and tenants over the lockdown period.
> Click here to read more
Fair proportion of rent and outgoings
There is no set formula for determining what is a ‘fair proportion of rent and outgoings’ and the landlord and tenant will need to try to negotiate and agree on this. The ADLS Lease requires that the parties first endeavour to resolve any dispute or difference by agreement and, if they agree, by mediation. If they can’t resolve it by agreement or mediation, then the matter may be resolved by arbitration. There is no precedent for this situation, as such the matter may only be truly clarified once cases are tested.
As a membership organisation, we cannot endorse any one tool or suggest what might be “fair”, this must be negotiated on a case-by-case basis, ideally with legal input. Some of our members from the legal profession have provided rough guidance, but as mentioned, this is not going to fit all situations and should not be taken as individual legal advice:
- 4 June: Government package for commercial leases too little, too late (member alert)
- 4 June: Government package for commercial leases too little, too late (media release)
- 4 June: Concern over Government's intervention in commercial leases (media release)
- 11 May: Galloping towards Alert Level 2 (member alert)
- 7 May: Retail property owners to develop 'best practice' standards for alert level 2 (media release)
- 5 May: Industry survey reveals majority of landlords have offered tenants rental support (media release)
- 4 May: Market confidence will dictate future development projects (media release)
- 4 May: Fast-track consent necessary for Covid-19 recovery (media release)
- 2 May: Intervention in commercial leases not the answer (member alert)
- 28 April: The good, the bad and the ugly (member alert)
- 24 April: The horse has bolted for commercial leasing code of conduct (media release)
- 24 April: Shopping centre industry prepares for ‘click and collect’ operations (media release)
- 24 April: The dawn of a brand new era (for now) (member alert)
- 17 April: If the plan doesn't work, change the plan, not the goal (member alert)
- 16 April: Expanding the bubble (member alert)
- 15 April: The only way out is through (member alert)
- 15 April: Further support critical to continued investment in the property sector (media release)
- 8 April: Patience is a virtue, but progress is a necessity (member alert)
- 31 March: We are your direct line to government (member alert)
- 27 March: What does the lockdown mean for tenants and property owners? (member alert)
- 27 March: Commercial landlords call for support to keep the economy moving (media release)
- 25 March: Council fiscal responsibility needs to be balanced by prudent spending (media release)
- 24 March: Shopping centre industry prepares for Alert Level 4 (media release)
- 24 March: What does an Alert Level 3 and 4 mean for property? (member alert)
- 18 March: COVID-19 economic support package welcomed by the property sector (media release)
- 18 March: COVID-19 economic support package: what's in it for the property sector? (news story)
- 17 March: Property Council's response to COVID-19 (member alert)