Government introduces law to assist tenants

Written By: - Date published: 8:59 am, September 29th, 2021 - 19 comments
Categories: business, capitalism, covid-19, Kris Faafoi, labour, Media, the praiseworthy and the pitiful, uncategorized - Tags:

The Government has announced changes to Tenancy law to provide some assistance to commercial and residential tenants.  From the Beehive website:

The Government has introduced changes to help ease the impacts of COVID-19 restrictions on both commercial and residential tenancies.

As part of the COVID-19 Response Legislation Bill introduced to Parliament, measures are being taken to help businesses resolve disputes over commercial rent, as well as provide greater certainty for landlords and tenants by protecting residential tenancies from being terminated during COVID-19 Alert Level 4.

“With regards to commercial rental situations, we have heard the concerns from business operators unable to meet full rental costs while their incomes have been hit by COVID restrictions needed to contain the spread of the virus,” Justice Minister Kris Faafoi said.

“Therefore an amendment to the Property Law Act is proposed to insert a clause into commercial leases requiring a ‘fair proportion’ of rent to be paid where a tenant has been unable to fully conduct their business in their premises due to the COVID-19 restrictions.

“Landlord and tenant would need to agree on the amount of rent that is fair. They could also agree that the clause does not apply,” Kris Faafoi said.

Arbitration will be required where landlords and tenants are unable to come to agreement about a fair rent proportion, unless they agree to an alternative dispute resolution process such as mediation.

And for residential tenancies:

The legislation will be similar to the no tenancy termination measures in place last year, but with some key differences … [t]enancy termination restrictions will not apply for a fixed period of time. Instead, the restrictions will be able to be switched on and off by Ministerial order.

The changes have attracted some really overblown rhetoric from the usual suspects.  For instance there is this extreme version from Barry Soper:

… they dropped another bombshell, again in the property arena, with commercial property owners being left punch drunk with Justice Minister Kris Faafoi putting in some time at the office and announcing leases were being changed.

Faafoi, who doesn’t have a legal bone in his body, is making changes to property law, inserting a clause allowing a tenant to pay a “fair proportion” of their rent where Covid has impacted on their business. It avoids the Government having to step up to compensate the struggling tenants.

And Property Council spokesperson Leonie Freeman expressed outrage and said the only people to benefit from the change would be lawyers.  From Radio New Zealand:

“This proposal completely misses the intricacies of commercial leases. Where is the bespoke response for hospitality or retail? Why aren’t we focusing on where the need is the greatest?” she said.

Freeman told Checkpoint there was no consultation with tenants or landlords.

“It’s a great day to be a lawyer because all it’s going to do is create a whole lot more uncertainty and litigation when we want businesses focusing on getting back to business.

“The focus really needed to be on the areas where the tenants are really vulnerable, particularly in hospitality.

“What does a fair proportion of rent mean?”

The overblown rhetoric ignores the fact, dear reader, that the proposal is to ensure that the same provision that already exists in many commercial leases will exist in all commercial leases.  The Auckland District Law Society lease, which is an industry standard lease, contains this provision:

If there is an emergency and the tenant is unable to gain access to the premises to fully conduct the tenant’s business from the premises because of reasons of safety of the public of property or the need to prevent reduce or overcome any hazard, harm or loss that may be associated with the emergency … then a fair proportion of the rent and outgoings shall cease to be payable for the period commencing on the date when the Tenant became unable to gain access to the premises to fully conduct the Tenant’s business from the premises until the inability ceases.

The change was introduced in 2012 after the Christchurch Earthquake to address particularly odious examples of landlords insisting on full rental being paid by tenants whose businesses had been hopelessly compromised by the earthquake.  Lawyers have had 9 years to work out what the words “fair proportion” mean.

This form of lease is in wide use although some malls will have their own specialised versions of lease that they use.

For leases without this provision the parties are free to negotiate their own changes and many have.  For those landlords who do not have such a provision in their lease and who refuse to negotiate rent reductions then I have absolutely no sympathy for them.  Many businesses are doing it tough.  Landlords should not be exempt.

19 comments on “Government introduces law to assist tenants ”

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  1. Ad 1
    29 September 2021 at 9:46 am

    Good quote from the ADLS. They are the holders of all those templates. Leonie Freeman is a histrionic loon.

  2. Muttonbird 2
    29 September 2021 at 10:18 am

    I think Barry Soper is in early stage right-wing flounce/self cancel syndrome.

    We've seen it with Hoskings, Leighton Smith, Peter Williams, Paul Henry, Chris Lynch, Sean Plunkett, John Banks, Duncan Garner, and the guy that Soper's wife replaced.

    Soper's language is becoming increasingly florid and desperate in a mad attempt to fight off diminishing relevance.

    • Patricia Bremner 2.1
      29 September 2021 at 10:33 am

      yes Agree, I would add Mark Richardson to your list Muttonbird. devil I had some thoughts about his comments below.

  3. Patricia Bremner 3
    29 September 2021 at 10:25 am

    So Barry Soper thinks the public purse should pay these commercial landlords?

    How the right wish to "privatize profits but socialize losses".

    His remarks about Faafoi show deliberate nasty ignorance. "Put some time in the office" inferring Faafoi skives off, and then "not a legal bone in his body" ??

    Faafoi has access to the best legal brains and advisors in the country Barry, your hand wringing is comical and predictable. I almost expect to hear someone say "Stage right aaand cut!!"

    • Michael who failed Civics 3.1
      29 September 2021 at 11:29 am

      TBF privatizing profits and and socializing losses is what neoliberalism is all about. It is the default setting of all NZ government and law since 1984. That said, it's beyond time that rentier capitalists had their wings clipped.

  4. Jenny how to get there 4
    29 September 2021 at 10:34 am

    They should consider themselves very lucky that they are not facing a Labour government similar to the first Labour government. Which imposed a full moratorium on mortgages and rents, to lessen the hardships of the depression on farmers and working people.

    …..by 1931, it was clear that further intervention was necessary to prevent widespread foreclosures and mortgagee sales…..

    ….Although mortgage relief was frequently discussed at some length by
    contemporary commentators, and by some historians in the 1950s and
    1960s, it has been relegated to a few lines at most in more recent works.’

    …..This Act also extended to lessees [renters] the same protection
    that had been granted to mortgagors,

    The modification of mortgage conditions was not new in New Zealand. A ‘mortgage moratorium’ had been imposed as a war measure in 1914,

    http://www.nzjh.auckland.ac.nz/docs/1987/NZJH_21_2_03.pdf

    • Michael who failed Civics 4.1
      29 September 2021 at 11:31 am

      Interesting account there. Thanks for posting.

    • tc 4.2
      29 September 2021 at 3:13 pm

      It's a centrist govt unwilling to scare the horses.

      Imagine the constant deafening shrieking if genuine change was proposed.

      they would blow an artery with outrage.

  5. Graeme 5
    29 September 2021 at 12:31 pm

    What got the action after the first lockdown was the arbitration package. That put the wind up people who were being pricks, on both sides. It certainly brought our landlord to the table and an agreement. This time round she couldn’t be mire accomodating. We’re ADLS

    I know a small industrial landlord who had a large national tenant, they just stopped rent in 2020 lockdown, again sorted pretty quickly under threat of compulsory arbitration. I think the low uptake of the arbitration package was more that once it was in place, no one needed it, the wide boys and girls weren’t going anywhere near arbitration.

    The ADLS lease is evidently up for a rewrite, it would be good if the loss of access clause could be widened to include things like the CRL disruptions, some people are getting totally fucked over there. The following clause regarding permanent loss of access should also be clarified so that it covers changes like have been wrought by the pandemic to tourism and by the CRL, at present it only covers physical access.

    • Ad 5.2
      29 September 2021 at 4:44 pm

      Agree re impact of civil works.

      The PWA Injurious Affection clause is just hopeless, but no one will change it so the government has to keep making exceptions to $$$ oil very squeaky wheels.

    • Chris 5.3
      29 September 2021 at 4:49 pm

      There's been a lot happening with clause 27.5 of the ADLS lease document and Covid. Cases have determined that a landlord must reduce the rent (no surprise there because that's what the clause says but in Covid times landlords have been refusing to) and the norm in terms of quantum is around 75% plus the first week free.

      Another interesting thing is that the Disputes Tribunal has accepted jurisdiction to hear disputes involving clause 27.5 (or anything regarding the lease providing the amount at stake is under $30k) even though the ADLS lease talks about arbitration. It relies on s 16 of the Disputes Tribunal Act which prevents contracting out. This is good news for small business owners because the cost of arbitration is often prohibitive and gives landlords, often represented by fuckwit property managers, licence to run roughshod over the hapless tenant:

      https://www.disputestribunal.govt.nz/assets/Documents/Decisions/JC-v-GCQ-Inc-2020-NZDT-1318-20-November-2020.pdf

      • Graeme 5.3.1
        30 September 2021 at 8:20 am

        Jeez, that dispute looks like a lovely tenant / landlord relationship. They are disputing $2,129.43 rent and the landlord runs up $5,152.00 in legal costs? Tenant seems to be digging their toes in a bit much as well. Pity the adjudicator, but a good decision.

        A very good move that minor lease disputes are heard by Disputes Tribunal. Hopefully the jurisdiction ruling won't be overturned by a court. It's rather common in small commercial leases where the tenant is presented with a cost increase slightly less than the cost of fighting the increase, quietly ratcheting the rental costs up over the lease term.

        • Chris 5.3.1.1
          30 September 2021 at 10:32 am

          The legislation would have to change, but yes, a National government probably would want to change it.

  6. Pete 6
    29 September 2021 at 12:43 pm

    Soper has this thing about being outraged. Maybe it's on his daily bucket list.

    Today it's "bombshell" and "punch drunk."

    And Faafoi "doesn’t have a legal bone in his body?" From Soper who demonstrates repeatedly he doesn't have a properly functioning brain in his?

    • tc 6.1
      29 September 2021 at 3:25 pm

      Rotating opinionators whining on demand, old man shouts at cloud.

      Telling that it's not behind the paywall to encourage subscription but left out there to maximise potential dissent.

      • Drowsy M. Kram 6.1.1
        29 September 2021 at 4:20 pm

        LandLORDs are doing it tough, I tells yah. Yelling at clouds and howling at the moon can be therapeutic, but (like the trees) they don't listen to me. Why don't they listen (anymore)?!!

        In spite of relentless media negativity, NZ’s covid story is largely successful [22 Sept 2021]

        There is a difference between “holding power to account” and deliberately attempting, for purely partisan political reasons, to undermine public perceptions that the covid-19 response is being well managed.

        “I tried, I really did, but I wanted to stick needles in my eyes by about four minutes in,” said Newstalk ZB’s Kate Hawkesby, the day after the return of the 1pm press conferences. “I’d forgotten how soul-destroying it is to be spoken to like a three-year-old.”

        On the same station, Hawkesby’s husband, Mike Hosking, overdubbed turkey “gobbles” and truck horn sound effects onto an interview recorded with Associate Health Minister Dr Ayesha Verrall.

        Newstalk ZB’s political editor, Barry Soper, in a report about an Auckland man whose kidney surgery was postponed due to staffing shortages, loaded his story’s preamble with phrases like “their altar” and “practise what they preach”.

        He also issued a remarkable dog-whistle to New Zealand’s far-right, the kind of people who believe Ardern – a fairly mild political centrist – is turning the country into a “communist dictatorship”.

        “If you have ever wondered what it must have been like to live in a totalitarian state, then perhaps wonder no more.”

        This nonsense went on and on.

        And on…

  7. Enough is Enough 7
    30 September 2021 at 11:23 am

    This a terrible law change.

    The Harvey Normans and Aussie Banks of this world are in a much better position to weather the COVID storm then landlords, yet the government is transferring the financial risk from those big Aussie corporates to Kiwi landlords.

    If parties freely agree that, then fine, but this shouldn't be imposed on landlords

  8. Michael who failed Civics 8
    30 September 2021 at 12:04 pm

    The right are campaigning for submissions from landlords opposing the Bill. Doubtless, the usual forms of lobbying, directed at Labour MPs, will take place too. People concerned about rentier capitalism and its effects must step up and make submissions too. Recommending wealth taxes and rent controls, at least during pandemics, should feature. Otherwise, the political Right win again and the non-rich continue to suffer under a Labour-led government.