Government support for commercial landlords and tenants

Since the Level 4 COVID-19 lockdown commenced in New Zealand commercial landlords and tenants have been eagerly awaiting a Government announcement on rent support.

The Government’s initial announcements were made last week, and were limited (at this stage) to extending the time periods for tenants and borrowers to remedy a default under their lease or mortgage. The changes are to the Property Law Act 2007 (PLA) provisions:

• The timeframe for a landlord cancelling a commercial lease has been extended from 10 working days to 30 working days (being both the period the tenant is in arrears before the notice is given and the period to remedy the breach).
• The timeframe for lenders exercising their rights as mortgagee in respect of mortgaged land has been extended from 20 to 40 working days and the period for mortgaged goods has been extended from 10 to 20 working days. The changes relate to mortgages of both residential and commercial properties, although the Government has said it expects residential borrowers will (at least initially) rely on the mortgage payment deferral scheme.

It is intended that the legislation will be introduced on 27 April and based on the information released by Government, the changes will apply to all notices served from 10 days after the Epidemic Notice was issued on 25 March 2020.  The current PLA timeframes are to resume six months after the Epidemic Notice expires.

While the extended timeframes will allow for a more orderly process in dealing with commercial lease disputes caused by COVID-19, the measures are quite limited and fall well short of the rent relief proposals submitted to the Government by the Property Council, which  (if adopted) would have seen monetary support provided to commercial tenants to meet their rental payments.

Commercial premises are generally the second largest fixed cost for a business behind wages, so we hope that further Government relief follows which provides tangible support to tenants paying their rent over the coming months.