Eight industry groups representing business have joined forces to call on the Government to increase protection for commercial tenants in the face of rents that have become unaffordable under the COVID-19 lockdown and could cause business failures and job losses.
The business groups are asking for an immediate six-month moratorium on lease cancellations and debt recovery action by landlords for commercial tenants whose businesses are eligible for the Wage Subsidy.
The groups are also asking for a mandatory code of conduct for commercial leasing to be created as soon as possible that sets a level playing field in landlord and tenant negotiations for fair and proportionate relief from rents linked to turnover.
Speaking on behalf of the groups, Greg Harford of Retail NZ said they applaud the Government for its response to COVID-19, which gives New Zealand the best possible chance of recovery.
Harford said the Wage Subsidy is a genuine lifeline which will preserve businesses and protect jobs while other significant measures are keeping the lights on in the economy.
“But without action on rent and leasing costs, all of this could be brought to nothing: many businesses are facing possible eviction and costs,” he said.
“If nothing is done, the effect will be to drive businesses from their operating locations, impacting jobs and communities for many years to come.”
Harford said short-term action on commercial tenancies is the missing piece of the COVID-19 response jigsaw and could be the difference between an economy that is ready to go again and one that will be scrambling to make ends meet. Proportional relief from rent and outgoings is essential to saving many businesses.
“The Government has already moved to support commercial landlords by reinstating depreciation, and we would also encourage Ministers to look at other ways of supporting them if required.”
Adrian Chisholm, founder of TourismProperties.com and a previous owner of a wide range of tourism businesses and a former landlord and tenant, said tenants and landlords need to accept they are “joined at the hip” and allow common sense to prevail.
Landlords should realise that if good tenants fall over, there is no queue of prospective occupiers, which would result in illiquidity and value erosion to the market value of the property.
“There’s merit in the argument that some rent is better than losing a good tenant and the prospect of no rent at all, and other options include Government-sanctioned bank loans which require approved cashflow statements and business plans which are currently nearly impossible to establish,” he said.
“What’s required is an open book process where the tenant pays an adjusting percentage rent to turnover.”
But the Property Council has expressed disappointment over the open letter, calling it “inflammatory and out of context”.
“At the moment, everyone is hurting, and we have a responsibility as property and business owners to work together and share the necessary pain,” Leonie Freeman, CEO of the Property Council of New Zealand, said.
“These are uncertain times and people are understandably afraid of losing their livelihoods. This is true for retailers, business owners and property owners alike,” she said.
Freeman said there was little sense in implementing a mandatory code of conduct now, since many landlords and tenants have already started, and often completed, negotiations.
“The horse has bolted,” she said.
She noted that most property owners and tenants have chosen to act responsibly and find common ground, and only a handful of players on both sides have chosen to take staunch positions.
“Neither party can exist in isolation and we need to keep this at the fore as negotiations continue over the coming weeks,” she said.
“The focus should now be on how we get businesses open under Alert Level 3 and eventually Alert Level 2 as this will help to solve a number of cashflow issues that many businesses are currently facing.”
