Leonie Freeman: Filling the void left by the Government

As you know, the COVID-19 Response (Management Measures) Legislation Act 2021 received Royal Assent on 2 November 2021 and is now in force.

This Act amends the Property Law Act 2007 to imply a rent and outgoings abatement term (similar to clause 27.5 of the ADLS lease) into leases that currently do not contain that clause.

The Government had indicated during the brief consultation period that they would release Operational Guidelines to provide further information for determining a fair proportion of rent.

We have followed up regularly both before the Act was passed and afterward to offer assistance in the development of these operational guidelines but have received radio silence.

Our response has been to develop guidelines of our own.

The good, the bad and the ugly

In my role I hear many different stories and situations. Hardships are not limited to just tenants, nor just landlords. It is a challenging time for many businesses on both sides of the coin, particularly in retail and hospitality. People need certainty and the opportunity to move forward with some degree of hope.

I am confident that a vast majority of our property owner members have done the right thing over the past 18 months and provided rental support to tenants. As part of our submission on the Act we surveyed our membership and found that the 200 respondents had provided over $650 million in rent relief since March 2020. What a phenomenal contribution our sector had made – without any Government intervention.

Waiting, waiting, waiting

Those trying to work through rent issues in recent weeks have been in limbo. Waiting for support and guidance that has yet to arrive – in the absence of any response from Ministers and officials I had tried seeking further information from the COVID-19 website but as at 16 November the only reference to rent relief is from 2020.

The new Act included a requirement for tenants and landlords to respond in a timely manner. In fact, it was a recommendation Property Council put forward as a way to help resolve disputes as we had seen its successful adoption in Australia. The timeframe for response is 10 working days.

For tenants and landlords who commenced communication immediately after the Act was passed, this 10 day period is now up and there is not a guideline in sight.

Our role in filling the void

Property Council is responsible for three industry standard leases – retail, office and industrial. We also publish a range of industry standard documents across multiple issues to help provide clarity and standards in certain key areas.

Given the absence of any government guidelines, and after multiple unsuccessful attempts to offer our input and engage, we believe on behalf of our members that we have a leadership role and duty to assist landlords and tenants in their discussions on this issue.

We understand the urgency to provide something to the market so our PCNZ guideline drafting commenced on 13 November, noting consultation occurred with a wide range of landlords and tenants by 17 November for release on 18 November.

Our answer is the Property Council Draft Industry Operational Guidelines for Determining a Fair Proportion of Rent. 

The guidelines are advisory only and are not, of course, legally binding in the case of a dispute. They are not intended to replace the need for the parties to seek their own legal advice, as the final determination of what is “fair” will very much depend on the particular circumstances.

Our intention is to at least give property owners and tenants a starting point for discussion, on the understanding that this information may be updated based on further feedback from the property industry, and when new Orders are released on the COVID-19 Protection Framework.

We hope that these Guidelines assist tenants, landlords, mediators, and arbitrators in resolving disputes regarding “fair proportion” rent reductions, as applicable to periods of enforced lockdown.

Should you have any feedback on the draft Operational Guidelines, or wish to make a suggestion, please contact me directly at leonie@propertynz.co.nz.

Ngā mihi nui.

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