Covid 19 Delta outbreak: Labour, Green MPs recommend commercial lease changes be backdated to start of outbreak

Justice Minister Kris Faafoi came under fire for the lack of consultation over plans to pass laws to require rent relief on commercial leases. Photo / Mark Mitchell

Legislation requiring landlords to give tenants a "fair proportion" of rent relief because of Covid-19 restrictions should be effective from the start of the current Delta outbreak, a majority of a select committee has recommended.

At the end of September, Justice Minister Kris Faafoi announced that the Property Law Act would be changed as part of emergency Covid-19 legislation, just minutes before the legislation was to go before Parliament.

The changes would insert an implied clause into leases which contain no provision around what happens in the event tenants cannot enter their premises.

On Friday, the Finance and Expenditure Committee delivered its report on the Covid-19 Response (Management Measures) Legislation Bill, which recommended only minor changes to the section related to commercial leases.

Labour and Green MPs did, however, recommend the implied clause be effective from August 18 - the start of the latest restrictions - rather than September 28, as the draft legislation proposed (the day it was introduced to the House).

"Labour Party and Green Party members accept the general rule that legislation should not be retrospective, and should only take effect from the date it receives Royal assent. However, these members believe the current pandemic circumstances justify a departure from the rule," the report said.

Submitters from the property industry told the committee while many retail and hospitality businesses had suffered severe losses in the latest lockdown, the legislation as proposed would apply to all lease holders, irrespective of the impact of the restrictions.

Scott Pritchard, the chief executive of Precinct Properties and chairman of the Property Council, warned the legislation might mean less relief for small businesses if it was forced to give relief to professional service firms or banks.

The Property Council said if the select committee did recommend the clause, it should come with added restrictions about which companies could use it, such as smaller New Zealand businesses or those eligible for the wage subsidy scheme.

While the committee said it struggled with the criteria, it did not believe it could find conditions which covered the broad situations faced by businesses.

"We are aware of businesses that would not qualify for rent relief under the above criteria, even though they were struggling. Business ownership structures vary widely, and it would be extremely complex to determine what constituted a New Zealand business, and what size of business would qualify."

Likewise, the committee elected not to give guidance on what should be taken into consideration when assessing what a "fair proportion" might be as MPs had been convinced by officials that doing so "would run the risk of unduly restricting what might be taken into account in determining what amounts to a fair rent reduction".

The Property Council said in a statement that the report showed an unwillingness by the bureaucracy to listen to solutions being offered. The council had argued that while it did not believe the changes were necessary, if they were introduced they should be restricted in order to not offer relief to businesses that did not need it.

"Officials in Wellington might say it's too hard to do, but that's a classic Wellington state of mind," Property Council chief executive Leonie Freeman said.

"Those of us on the ground offered our expertise from both landlord and tenant perspectives - sadly that fell on deaf ears. As has every offer we have provided to help the Government come to a workable solution."