Leonie Freeman: New Alert Levels, same challenges

With a majority of the country basking in the additional freedoms of ‘Delta Level 2’, it’s hard not to feel hard done by when you’re sitting in Auckland, stuck in the rigidity of Alert Level 4.

Although, feedback from our wider membership this week has indicated that Level 3 and Level 2, while better, have only exacerbated material supply issues the industry was already facing. Many companies both large and small face the possibility of shutting down sites as they don’t have the product they need to continue construction.

This issue was raised at the Construction Sector Accord several weeks ago, and although the Government was sympathetic and understood the consequences of split Alert Levels across the country, they had little choice but to prioritise the nation’s health.

That’s why it’s been good to see this week’s announcements around easing restrictions on certain suppliers based in Auckland to ensure the rest of the country can keep doing business. For more info, read here.

The other issue rearing its ugly head in recent weeks has been last years’ hot topic; commercial rent subsidies. You may recall in 2020 the Government signalled that a mandatory commercial rent relief policy may be implemented – a proposal we vehemently opposed as it threatened to completely undermine the sanctity of commercial contracts. The proposal dragged on for several months and caused great uncertainty in the market, with landlords and tenants not sure whether to move forward and come to an agreement or wait and see what the Government mandated.

Eventually, the proposal was abandoned and a voluntary mediation service was instead put in place, a service that has reportedly only settled 20 disputes in the nine months it has been operating. Of the $40 million allocated to the scheme, only $215,645 (excluding GST) has been spent. We see this as evidence that the market had righted itself – property owners had acknowledged that some businesses were struggling more than others and adjusted their rent relief accordingly. Anecdotally, we heard of some tenants in the most highly affected sectors receiving up to a 100% reduction in their rent, while others were adjusted based on the financial position of both the landlord and tenant. While there were certainly a few rouge tenants and landlords out there who unfairly pushed an agenda, these were by no means the majority.

This was our reasoning for not supporting the National Party’s recent proposal calling for the Government to subsidise rent relief – from what we were hearing the market had already done this, often at a far greater rate than what the proposal had mandated (the proposal would require the Government to pay for half the rent and building costs for small businesses that had a 40% reduction in their revenue under Alert Level 4 or 3, while the landlord and tenant would cover 25% each, capped at $10,000 per month).

My training as a valuer taught me that all commercial leases are unique, which makes mandating a one-size-fits-all policy impossible. What is fair and equitable in one situation could mean the end of a business (be it the tenant or the landlord) in another.

Our view on this matter is clear; the collaboration of the past year has generally worked well and the Government should be encouraged by the outcomes of the previous lockdowns. A vast majority of tenants and landlords were able to negotiate and agree on a fair and equitable adjustment to rent. While it is hard for all businesses right now, we hope that this year will follow 2020’s pattern of a retail boom post-lockdown, which should at least alleviate some of the pain of the past few weeks.

While Auckland remains at Alert Level 4, the rest of the country is now in Level 2 and we hope enjoying their new found freedom. For those in Auckland – stay safe, look after yourselves, your whanau, and your team.

Ngā mihi nui.

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