Property Law Act changes get last minute tweak

With lightning speed, the Government pushed through their changes to the Property Law Act which inserts a rent relief provision into commercial leases across New Zealand. Property Council New Zealand fought against these changes on behalf of vulnerable tenants and landlords which almost everyone agrees are unworkable and will lead to worse outcomes.

Frustratingly, by the Government’s own admission they still don’t know the size and scale of the problem. Their approach of taking a sledgehammer to a nut does nothing to solve the root cause of the problem – cashflow. Almost all of the submissions to Government on the Bill recommended better financial support for tenants and landlords, noting even deferrals or abatements wouldn’t fix the problem.

Property Council produced a detailed submission in less than four days, and Chief Executive Leonie Freeman and Chairman Scott Pritchard presented to the Finance and Expenditure Committee. We promoted ideas and practical solutions that we thought could make the clause more workable. We suggested there be eligibility criteria for businesses to meet to be able to seek rent relief, including that you have actual economic loss, you are a New Zealand company and not a government entity, and that you are a SME of fewer than 25 staff. We also wanted to make sure there was parameters around what a ‘fair proportion of rent’ is including that there has to have been actual economic loss, and that it should take into account bounce-back earnings or the ability for businesses to pivot to click-and-collect and online sales.

While the Government didn’t take all our suggestions on board, they did agree that tenants should have to show some kind of economic loss when determining what a fair proportion of rent was. They also took on our recommendation around arbitration which allows parties to use other forms of dispute resolution and gives them a window of ten working days to communicate with each other over disputes.

We believe the changes the Government have made to the original Bill don’t go far enough. Upon clarification, the only feedback from officials was that implementing most of our changes would be too hard to do. Those of us on the ground offered our expertise from both landlord and tenant perspectives – which unfortunately fell on deaf ears, along with every offer we have made to help the Government come to a workable solution.

The changes come into force as soon as the Bill is signed by the Governor-General, and the affected period dates back to the 18 August 2021 – the beginning of Auckland’s latest lockdown.

The Ministry of Justice and other officials are working through some guidance around what ‘fair proportion of rent’ might look like, but so far we haven’t seen anything from them. We remain hopeful it gives some clear guiding principles to both tenants and landlords to negotiate in good faith.

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