The New Zealand Property Council (NZPC) has noted that commercial property owners and landlords need more support during these tough economic times. The Council is calling on the Government now to act swiftly, as the commercial property sector faces “hundreds of millions in lost revenue.”

Chief executive of the NZPC Leonie Freeman says, “We are hearing of a multitude of scenarios regarding rental payments. At one end of the spectrum there are many landlords working constructively with tenants on their particular situations and discussing rent relief such as postponement or other relief measures. However, there are many examples of large tenants sending letters announcing they are refusing to pay rent with no consultation. This move could devastate the commercial, industrial and retail property sectors.

“We will assist the Government in taking immediate action to support property owners through this period.”

NZPC is urging Government to take more direct action in the form of a subsidy or support package, saying that what happens in the next three months will be critical in keeping the economy moving.

“There are a variety of potential solutions that would alleviate the economic impact of COVID-19, but action must come from the top and it must be put in place quickly. The ramifications of letting property owners bear the brunt of this crisis are dire,” she continues. “There’s little point in having a tenant survive with the landlord foreclosed on and vice versa. We must work together to get through this period of unpredictability,” Freeman says.

The Council notes three aspects to consider in creating solutions for both tenants and landlords: The contractual position, or what the lease agreement allows; the commercial position, or what will keep both parties in business; and the ethical position, or what is the right thing to do for concerned parties and the community at large.

Freeman comments, “There has been much speculation around the impact of a specific contract clause (Clause 27.5 and 27.6 of ADLS Sixth Edition) put in place after the Christchurch earthquakes that stipulates that tenants do not have to pay rent should they not have access to the premises. Whether or not a tenant’s lease includes this clause, we would encourage owners and tenants to negotiate in good faith what a fair proportion of rent is. This will help ensure that property owners can continue providing a service long after COVID-19 is no longer in the headlines.”

Though the Government has recently reintroduced depreciation on buildings, Freeman states, “It is simply not enough to bridge the gap in what is becoming a crisis of cashflow for many property owners.”

“On a local level, our members have also asked that local government look at rates relief and re-consider their proposed rates increases during the upcoming annual plan process. With many proposed rates increases exceeding 5 per cent and some in excess of 10 per cent, the draft Annual Plans need to be adjusted to a level that is fiscally responsible – ideally at the rate of inflation – leading into a predicted global recession,” she continues.

“Property Council welcomes further discussion and collaboration with the Government and local authorities as we continue to work together to find a solution that ensures both businesses and property owners continue to operate.”