Labour and NZ First reach deal over commercial rents, which is likely to cover few businesses

After weeks of to and fro, Labour and New Zealand First appear to be close to reaching a deal to force rent negotiations between commercial tenants and landlords, albeit on a very limited scale.

Since April the Government has been grappling with how to meet expectations it ramped when it signalled it was preparing to step in to provide a mechanism for businesses which had been hit by lockdown to help prevent the spread of Covid-19 to negotiate concessions.

It is not clear how many businesses will be covered; any business which has already reached a deal with its landlord over covid-related rent relief appears set to be automatically excluded.

READ MORE:
• Government ponders commercial rent support, meets mixed reaction
• Opinions divided on Government rent subsidy for business
• Labour's plan to force rent negotiations said to be blocked by NZ First
• Labour says commercial rent relief talks continue, but warns not sector not to hold its breath

According to multiple sources, the Government's deal would cover only small, New Zealand-owned businesses, probably excluding any business with more than 50 employees.

Businesses will also have to have been deemed non-essential, meaning they were unable to operate under Covid-19 alert levels 3 or 4, a person briefed on the plans said.

Businesses which qualified and which could not reach a deal with their landlord could then require arbitration, most of the cost of which would be covered by taxpayers.

The deal will have no practical impact for most businesses.

On Friday Finance Minister Grant Robertson said the "vast bulk" of commercial leases had a clause which covered events where tenants could not occupy their buildings, as well as talked up how many landlords had reached an agreement on rent with their tenants.

But the move, if confirmed, will allow Prime Minister Jacinda Ardern to announce some form of concession for tenants.

Earlier announcements by the Government not only ramped expectations, but caused some negotiations which were underway to seize, as tenants waited for what the Government was planning.

In late April, Justice Minister Andrew Little announced that the Government was considering changing the Property Law Act "to support New Zealand businesses in managing their rent".

Little said issues being considered concessions "for a period where the response to Covid-19 has had a material impact on a business".

Several weeks later Little took a plan to Cabinet which NZ First Ministers did not support without putting the matter to the caucus.

At a caucus meeting the following day, NZ First agreed not to support the proposals, on the grounds that not only did many leases cover unexpected interruptions to commercial tenancies, that the move would also intervene in private contracts.

In the weeks following, Ardern and Robertson both talked of the hope of making an announcement , while also appearing to offer sympathy for commercial landlords.

"It's often perceived from the perspective, understandably, of the tenant," Ardern told a post-Budget business briefing on May 15 about the question.

"There will be, in many cases, commercial property owners who equally are actually in vulnerable positions themselves."

Robertson, who has also said commercial tenants are in many cases more powerful than landlords, has continued to both talk up the prospects of a deal while also urging tenants and landlords to continue to talk.

On Friday he acknowledged that there were "a wide variety of views" on the issue, which were not necessarily along party lines.

This week there have been signs that a deal is close.

Stuart Nash, the Napier MP who is seen to be on the Right of the Labour Party, is understood to have played a key role in finding common ground with NZ First on the issue.

On Wednesday morning, Nash said he had been working hard on the issue - part of his role as the Minister of Small Business, he said - and signalled an announcement was imminent.

"You will see an announcement this week on this," Nash said on Newstalk ZB, after host Mike Hosking asked whether the rent relief plans which were being blocked by NZ First leader Winston Peters "would see the light of day".

Nash said the issue was complex.

"We're talking about contract law here and we're talking about coming up with a system that actually works and delivers value," Nash said.

Even yesterday there were concerns that NZ First could pull out of the deal as it seeks to create space between the party and Labour for political purposes.

National MP Mark Mitchell, also appearing on Newstalk ZB, suggested that "Beehive spin doctors will be going mad" after Nash made the announcement on air.

However, later on Wednesday the Government's plans for rent relief were confirmed by the Economic Development Cabinet sub committee.