Property groups say they have given $320m in rent relief amid plea for lease law tweak

Justice Minister Kris Faafoi had given no hint he was planning a law change to force rent relief until the changes were announced just before a law change entered Parliament. Photo / Mark Mitchell

A group of major New Zealand property companies are pleading with the Government to amend its surprise lease law changes, hinting at a willingness to offer a deal that covers retail and hospitality businesses.

On Tuesday Justice Minister Kris Faafoi announced the Government was making an immediate change to the Property Law Act which will insert a clause into commercial leases requiring a "fair proportion" of rent to be paid where a tenant has been unable to fully conduct their business in their premises due to the COVID-19 restrictions.

The move - announced minutes before the legislation was introduced to Parliament - stunned observers, including even groups representing hospitality and retail businesses who had called for rent relief but believed nothing material was even being considered.

Yesterday, a group led by the Property Council New Zealand, wrote to Prime Minister Jacinda Ardern complaining that the move would likely have "unintended consequences", complicating the way parties agreed contracts as well as offering relief to companies the Government was intending to assist.

"Having the right to freely negotiate the terms of our leases from both a landlord and tenant perspective, is a fundamental and essential part of our commercial and social license," Property Council New Zealand chief executive Leonie Freeman wrote.

Landlords and tenants up and down the country had negotiated in good faith, Freeman wrote, adding that major property owners "have given in excess of $320 million in rent relief to Kiwi businesses" since the start of Covid.

"The decision to impose a clause without agreement only serves to jeopardise the goodwill that landlords and tenants have created."

Freeman's letter did not spell out exactly how it came to the figure, but the group of signatories included some of New Zealand's largest property investors.

Property Council chief executive Leonie Freeman said on Thursday she felt as if she had been "cheated" with the surprise change to the Property Law Act. Photo / Doug Sherring

As well as a group of privately owned companies, signatories to the letter included major NZX companies Auckland International Airport, Precinct Properties, Argosy Property, Property for Industry and Stride Property, as well as Scentre Group, the company that owns the Westfield malls.

While the industry is clearly upset at the move - in a radio interview on Thursday Freeman said she felt as if she had been "cheated" - Thursday's letter appeared to propose not that the law change be struck down, but amended to cover hospitality and retail.

"We understand the pain being felt by the retail and hospitality sectors in particular, and we accept the intent of the proposal is that those sectors will receive equitable rental relief from their landlords," Freeman wrote.

"However, the proposal as drafted has significant and widespread application beyond the intended beneficiaries, by changing all commercial leases, the vast majority of which are not those which the legislation is intended to assist."

It added: "We believe the proposed legislation could be amended in such a way to mandate the right to rental relief for the targeted businesses, but without having the widespread application outlined above. For example, at its simplest level this could include a qualification criterion that a lessee must be eligible for the wage subsidy in order to imply the right to rent relief into their lease."

The amendments were included in the COVID-19 Response Legislation Bill which was introduced into Parliament on Wednesday. Irrespective of when the bill passes into law, the changes will be effective from September 28.

So far Faafoi's office has not responded to requests for interviews.