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New COVID-19 commercial rent law passed

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Temporary law changes have been passed in Parliament enabling landlords and commercial tenants to agree a fair proportion of rent relief where a business has suffered losses due to the impacts of COVID-19. The law aims to

The Association has been advocating for provisions to be made around commercial rent relief since the start of the pandemic in 2020 and welcomes this new legislation which will aim to ensure that agreement of ‘fair rent’ is made between landlords and tenants and that the financial burden of the impact of COVID-19 restrictions is shared.

Provisions in the COVID-19 Response (Management Measures) Legislation Bill will apply when a tenant and landlord have not been able to reach agreement on a fair proportion of rent relief when the tenant has not been able to fully conduct business because of COVID-19 restrictions. The changes are to ensure that landlords and tenants come to reasonable agreements about rent obligations while still respecting agreements that have already been made.

The landlord and tenant will need to agree on the amount of rent that is fair. They could also agree that the clause does not apply to their lease.

This law change only applies to leases which do not already provide for adjusted rent payment terms during an epidemic emergency. Agreements that parties have already made to adjust rent terms to reflect the COVID-19 situation will also not be affected by the new provisions.

The changes apply from 18 August 2021, which is the start of the most recent rise in Alert Levels.

Changes include:

  • a requirement that landlords and tenants must consider the tenant’s loss of income in determining a “fair proportion” of rent,
  • a requirement that the landlord and tenant must respond to each other within 10 working days of communication about the new implied clause, and
  • that parties may seek to resolve disputes through mediation or other forms of alternative dispute resolution before a referral to arbitration, and that the Disputes Tribunal’s jurisdiction is not excluded as an option.

“These changes in the COVID-19 Response (Management Measures) Legislation Bill support businesses, particularly small and medium enterprises, to resolve disputes over COVID-19 related rent issues while in such a way that gives businesses the best chance of a sustainable recovery.

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