Gift store chain says 'vast majority' of retailers will qualify for rent-relief arbitration

A plan to offer rent relief for businesses hit by Covid-19 closures will not apply to all but should cover the "vast majority" of retailers, one chain of gift stores claims. Photo / Dean Purcell.

A proposal designed to spur rent relief for businesses hit by the impact of Covid-19 will apply to the "vast majority" of New Zealand retailers, the head of a nationwide chain gift stores believes.

But a last-minute change to the Government's plans means that many businesses which operate on a single site will miss out.

On Wednesday a Cabinet sub-committee approved a plan for the Government to make a temporary change to the Property Law Act which would allow compulsory arbitration between businesses which qualify and their landlords.

Businesses which qualify will be able to force their landlords into compulsory arbitration over rent relief over the impact of Covid-19 closures, most of the cost of which will be paid for by taxpayers.

Thursday's announcement was held up by more than a month because of divisions over the policy between NZ First and Labour.

Although it has been presented as a win for small business, the nature of the proposal means that many businesses which operate on a single site will miss out, while much larger businesses which operate over many sites would qualify.

It came after a last-minute change approved by ministers on Wednesday afternoon.

Although the proposal distributed to ministers ahead of the committee referred to companies having to have 50 or fewer employees to qualify, the Cabinet minute recording the decision said it would apply to businesses with "20 or fewer full-time equivalent staff per lease site".

Richard Thomson, the managing director of Acquisitions, a chain of gift stories with 20 stores between Auckland and Dunedin, said the change would have a major impact on the type of businesses which were eligible. Acquisitions has around 140 staff, over 22 sites.

"Under the proposal in the Cabinet [paper], this would not have applied to me at all, because I would have exceeded the total number of staff by almost three times," Thomson said.

"Under the revised basis I am able to use that arbitration clause where needed for each of those tenancies."

Thomson said the "vast majority" of his landlords had negotiated an agreement which was fair for both parties, but in the case of "two or three" no deal had been reached.

"This will certainly assist me in looking to get an agreement" with the remaining landlords.

Thomson said that while many companies which operated on a small number of larger sites would be excluded, he believed the "vast majority" of retailers would be entitled to use the clause.

One commercial property owner said it was wrong to characterise the agreement as a win for small businesses.

"State inference in private contract law is a very dangerous slippery slope that invariably results in absurd, silly and unintended outcomes," Troy Bowker, executive director of Caniwi Capital, said.

Some "genuine" small businesses would miss out because they had more than 20 staff at one site, Bowker said.

"Meanwhile very large nationwide businesses operating from many sites with 20 or less employees per site will be the winner at the expense of much smaller landlords. Think [about] your provincial retiree who has put his or her life savings into a commercial property syndicate."

Justice Minister Andrew Little said Labour had wanted there to be no limit on the size of the business which would qualify, once a business could establish that its entire business had been closed.

NZ First had proposed a cap on the size of the businesses which qualified, hence the cap in the Cabinet paper. "Other Ministers had a different view and we reached a compromise on the 20 FTEs [full time equivalents] per leased site for a business."

National's finance spokesman Paul Goldsmith said the proposal would intervene in contract law and lead to unintended consequences.

"Small businesses have been the victim of coalition dysfuction on this issue," Goldsmith said.