29 Apr 2020

Government weighs commercial rent solution for small businesses

7:22 am on 29 April 2020

The government is considering rent concessions to ease the burden from Covid-19 on small businesses, but has ruled out rent subsidies or freezes.

Andrew Little

Justice Minister Andrew Little. Photo: RNZ / Ana Tovey

Businesses have repeatedly cried out for a lifeline on commercial rents as the level 4 lockdown aimed at stopping the Covid-19 coronavirus stalled revenue for many.

In a statement to RNZ, Justice Minister Andrew Little said the government had already agreed to push out deadlines on lease terminations, but it was clear this alone would not be enough for many businesses.

"The government is now actively considering measures under which parties to a commercial lease would be expected to consider rent concessions in whole or in part for a period where the response to Covid-19 has had a material impact on a business," he said.

The minister, who oversees the Property Law Act, did not say what those concessions would be but that they could include a rebate or rent reduction.

The Epidemic Response Committee, a special select committee to assess the government response to the pandemic, yesterday heard from business owners.

Auckland Chamber of Commerce chief executive Michael Barnett said the government should issue an immediate six-month moratorium on lease cancellations and recovery action by landlords.

"And [it] should seek a mandatory code of conduct for commercial leasing to be created as soon as possible," he said.

Business New Zealand chief executive Kirk Hope backed a code of conduct to force landlords and renters facing financial difficulties to negotiate.

"To enter into a discussion and a negotiation about where the costs are going to fall and how they are going to be managed between the two," he said.

BusinessNZ chief executive Kirk Hope.

Business New Zealand chief executive Kirk Hope (file photo) Photo: RNZ / Richard Tindiller

"If the business isn't there the landlord simply doesn't get the rent, and that's probably a case no one really wants," he said.

Hope said the government could also consider an interest-free loan scheme, like the one operating in Canada, to help fix cash-flow problems.

Emma Fraser from Allure Nail Studio in Tauranga told the committee her business of 14 years was on the verge of closing.

"Please help us small business owners get back to operating, we need to restart our economy so that we can all heal. For this to happen we need for the government to provide us with more financial assistance," she said.

National Party finance spokesperson Paul Goldsmith said his party wanted a cash injection for businesses who had been waiting too long for support.

"Four or five weeks ago Grant Robertson came to our committee and said he was working on something around rent and would have announcements in the next few days. Five weeks later we are still hearing they have got announcements coming," he said.

The opposition challenged the government over its support for small businesses as Parliament resumed under alert level 3 yesterday.

National Party leader Simon Bridges asked Prime Minister Jacinda Ardern if she accepted that for businesses while the wage subsidy had been a "welcome lifeline" they are still struggling to meet their rental costs and will fold if they don't "receive more government support urgently".

"We did look at that other significant fixed cost for many businesses, which will be their rental costs, their lease arrangements," she said.

"There were limitations on what we were able to do ... but we've never ruled out continuing our supplementary support."

Little told RNZ new measures would not include a rent freeze or short-term rent subsidies, both of which would give commercial property owners income protection at a time when no one else was enjoying that privilege.

"The lockdown has affected businesses in different ways and it wouldn't be fair to have one solution, like a rent freeze, for every situation, especially when in many situations landlords have already agreed to rent reductions.

"Landlords need to share the burden of Covid-19 fairly with their tenants."

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