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last updated 02/09/2021

Calls for rental support ignored by Government

last updated 02/09/2021

2 September 2021 – The Franchise Association is among the organisations supporting an Opposition plan to support small businesses facing rental demands from unsympathetic landlords

Justice minister Kris Faafoi says the Government won't intervene in commercial leasing disputes unless the Covid lockdowns drag on. According to a report on BusinessDesk (subscription required) he also said there are no plans to introduce an Australian-style commercial tenancies code to help small businesses contend with overzealous landlords. 

This is despite a plan launched by former justice minister Andrew Little, announced last June, to insert a clause into property law to require a fair reduction in rent when a business suffered a Covid-related loss of revenue. That plan was never enacted, with former coalition partner New Zealand First being blamed for its failure. 

Mr Faafoi has reportedly said that he believed that 80 percent of landlords and commercial tenants had reached agreement; however, at a Zoom meeting yesterday, some franchisors reported that the figure was more like 20-40 percent in their systems. Brad Jacobs, co-director of The Coffee Club New Zealand, has said that three Auckland franchises were forced to close their doors last year with the loss of 30 jobs, with the closures caused solely by the inability to reach agreement with landlords to provide a level of fair and reasonable rent support.

He says, ‘We’re not asking government to pay rent or a handout, we just want a structure in place to help the tenant and landlord agree as to rent abatements.’ Such structures were put in place by the Australian government last year, and have been renewed this year in Victoria and New South Wales.

Opposition plan goes further

National’s Shadow Treasurer Andrew Bayly says, ‘I am hearing from small business owners and representative organisations everyday about the sky-high levels of anxiety and stress Kiwi business owners are experiencing, particularly those in Auckland who face at least another two weeks at Level 4.

‘The wage subsidy and Resurgence Support Payment have helped small business, no doubt, but rent is the most significant cost and while some commercial landlords are cutting their tenants slack, others are not.

‘The RSP doesn’t really go far when you factor in significant costs like unexpected stock wastage, insurance, rates, and the fact that the one-off payment is dependent on the number of FTEs a business has.’

He has developed a proposal for a Rental Support Package that he is urging the Government to adopt in order to take pressure off both tenants and landlords. This goes further than a structure to help tenants and landlords agree. 

Under this package, small businesses which have seen a 40 percent reduction in their revenue under either Level 4 or 3 would be entitled to 50 per cent of their assessable rent and associated building operating costs being paid by the Crown, on the proviso that the landlord contributes a 25 per cent discount on the rental costs for the duration of the period the Rental Support Payment is provided to the small business owner. This would leave just 25 per cent of the rental costs to be paid by the tenant.

In order to ensure any rental disputes can be settled quickly, the Government would prioritise emergency arbitration services when requested by either the Tenant or Landlord.  

The proposal has been supported by a number of business organisations, including:

  • Business New Zealand and their Employer & Manufacturing Partner organisations
  • Franchise Association of New Zealand 
  • Hospitality New Zealand
  • Restaurant Association of New Zealand
  • Retail New Zealand
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