The Government will make a temporary change to the Property Law Act in a bid to help businesses hit by the Covid-19 response get rent concessions.

Struck after weeks of negotiations, the changes also signal the Government wants to force tenants which have been refusing to pay rent to do so.

Details of the plan began leaking out this week.

This morning Justice Minister Andrew Little announced the changes, which he said "will insert a clause in commercial leases requiring a fair reduction in rent where a business has suffered a loss of revenue because of COVID-19".


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The changes, Little said, would provide guidance on applying an "implied clause" in the leases on what would amount to a "fair proportion".

Disputes about the implied clause will "be settled through a compulsory arbitration process in a timely and cost-effective way".

Most of the costs of the arbitration will be covered by taxpayers, with Little announcing $40 million in funding. For every dispute going to arbitration, the Government will pay a subsidy of $6000, about 75 per cent of the likely cost.

Exactly how many businesses will quality is not clear. The funding package implies the Government is prepared for more than 6000 disputes to go to arbitration although the language it has used suggests only a small proportion of leases have not agreed concessions.

Only certain businesses will quality.

Little said businesses would need to have "20 or fewer full-time staff at each leased site" and be New Zealand based.

Businesses which have already come to an agreement with their landlord - no matter how much or how little of a concession was granted - will not be able to use the new process.

In late April Little announced the Government was considering options to offer rent relief, but in the weeks since it has been playing down the scale of the problem.

Finance Minister Grant Robertson said last week that the "vast bulk" of leases already included clauses which set a framework for agreeing rent concessions for situations like Covid-19 and that even where they did not, many landlords and tenants were striking deals.

Meanwhile Prime Minister Jacinda Ardern has said publicly that in some cases landlords were more vulnerable than their tenants.

Little did not give an indication of how widespread it believed the problem it was trying to solve is.

"I am concerned that some landlords and tenants are not coming together to make agreements that reflect the seriousness and uniqueness of COVID-19, including behaviour where large commercial tenants refuse to pay rent, and landlords demanding rent from small retailers who haven't been able to operate," said Andrew Little.

"What is required is fairness between commercial tenants and their landlords. That is why the Government is moving to ensure there is appropriate rent relief, with the burden shared by landlords, tenants, and the Crown."

The changes take effect from today. "I encourage businesses and landlords to work towards reaching a fair agreement on the payment of rent," Little said.

While he was not mentioned in the release, Napier MP Stuart Nash said on Wednesday that an announcement was coming and that he had been working hard on the deal in his capacity as the Minister of Small Business.

The Herald understands Nash played a key role in negotiating an agreement with NZ First, which had earlier refused to back the plan on a number of grounds, including concerns that foreign companies may take advantage of New Zealand landlords, and that the move would see the Government intervene in contracts between private entities.