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last updated 29/06/2020

Rent negotiation bill stalled again

last updated 29/06/2020

25 June 2020 – Franchisees could lose their businesses and staff their jobs after long-awaited rent relief legislation delayed again

The Property Law (Leases Affected by Covid-19 Outbreak) Amendment Bill has been stalled again after NZ First withdrew its support. The Bill was to set the terms under which tenants could force taxpayer-funded arbitration if landlords did not offer them adequate rent relief due to the impacts of Covid-19.

The terms of the Bill were announced on 4 June after two months of lobbying by business associations for action to address the problem, and an announcement on 29 April that the Government was working on measures. However, Coalition partner NZ First blocked the original plan for some time before eventually agreeing to the Bill as proposed on 4 April and claiming that it had helped negotiate a much better deal than the one originally proposed by Labour. NZ First has now withdrawn that support.

Troy Bowker, executive director of commercial and industrial landlords Caniwi Capital, claimed that the party had won a victory over Labour. Caniwi Capital donated $24,150 to NZ First in 2019.

‘This proposed legislation would have given windfall gains to large multi-national tenants who did not need rent relief at the expense of small, New Zealand landlords,’ he told the New Zealand Herald (premium content)

The legislation as proposed required that:

  • The business has 20 or fewer full-time equivalent employees per leased premises, and;
  • The business must be New Zealand-based.

Businesses will close

The news of the delay has been greeted with dismay by the franchise sector, which includes 37,000 small businesses around the country, many of them in hospitality and retail – sectors badly affected by the lockdown. While many landlords and their tenants were able to negotiate fair rental arrangements for the period, others were – and still are – intractable. The proposed Bill aimed to force them to the negotiating table, and when it was announced on 4 June, franchisors and franchisees were encouraged to ‘start negotiating now’.

‘The “threat” of this legislation had helped us resolve two very difficult landlords in the last week or so,’ one major hospitality franchisor told Franchise New Zealand. ‘A couple of the big landlords are still being tough to negotiate with, but they are prepared to provide some support – maybe not as much as we want, but within reason.  But we still have four or five small landlords who will not budge and are simply saying, “Sorry, pay your rent” and not even having any reasonable discussion with us. With the stalling of the bill, in their minds they will now have the “power” back in their court.  

‘If this legislation doesn’t go through, it will almost certainly mean that three or four of our cafés will close, and three or four franchisees will lose their businesses, with 30-35 redundancies as a result.’

Is cross party support an option?

The legislation could still pass if National were to support it.

Opposition finance spokesman Paul Goldsmith told the New Zealand Herald he would wait to see if Labour would try to pass the legislation, but so far no one from the Government had asked if they would support it and the Bill in its current form had problems.

‘Presumably [the Bill] had been mucked around with in order to make [NZ First] happy in the first place. Now that they're not happy, maybe there's something better [Labour] could come up with.’

Landlords risk empty stores

One veteran property manager has warned there would be increasing swathes of empty stores if landlords and retailers did not start meeting each other in the middle.

Paul Keane, formerly the head of retail and property consultancy RCG, told Stuff that landlords who stuck to the letter of the law risked seeing more closures like those recently announced by several high-profile retailers.

‘If the tenant cannot access the landlord’s premises, then it is neither party’s direct cause, so why should one party be impacted more than the other?

'’Surely, it would be prudent to share the cost of recovery rather than risk tenant decline.'

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