On 28 October 2021, the Government amended the Property Law Act to imply a ‘no access in an emergency clause’ into commercial leases which do not already provide for adjusted rent payment terms during an epidemic emergency. The implied clause applies from 18 August 2021, which was the start of the most recent rise in Alert Levels, but will not affect agreements between landlords and tenants to adjust rent obligations made prior to that date.
Businesses without ‘no access’ clauses have been liable to pay full rent throughout the COVID-19 pandemic, although many landlords and tenants have negotiated rent reductions even without a ‘no access’ clause.
The no access clause allows the lease parties to agree on a ‘fair proportion’ of rent and outgoings that should be reduced during an emergency if the tenant cannot access the property to conduct their business fully.
The assessment of what is a fair proportion of rent is subject to agreement between the landlord and tenant. They are to consider any loss of income experienced by the tenant during the period they are unable to access the premises due to lockdowns or because of reasons of health or safety related to the epidemic.
The changes also require the parties to take all reasonable steps to respond to a communication from the other party about the operation of the no access clause, with any disputes being referred to arbitration under the Arbitration Act. Non-binding mediation and other dispute resolution alternatives such as expert determination may also be used to resolve the dispute.
The New Zealand Dispute Resolution Centre is offering a speedy low-cost fixed fee arbitration and mediation service for parties in such disputes where they have been unable to agree an appropriate level of rent reduction. More information on these and our other dispute resolution services are available here.