Many Kiwi businesses will fail during the Covid-19 lockdown if the Government doesn't urgently put together a rent relief deal, the Auckland Business Chamber has warned.

Already 30 per cent of businesses surveyed in an Auckland Business Confidence report released this morning indicated they would not make it through the global pandemic, the chamber said.

An earlier Government wage subsidy had helped businesses retain staff but could be for nought if businesses - currently earning no or reduced incomes - folded anyway due to high rents, industry figures said.

Hopes were now high the Government would announce a relief package in the coming days after the Australian Government revealed its own package overnight.


Brad Jacobs - director of The Coffee Club and responsible for negotiating leases for its 66 franchises - told the Herald relief could not come fast enough.

He said there was no clear ground on how to negotiate with landlords during the extraordinary crisis.

"Every possible scenario you can think of is what I've had in the last two weeks," he said.

That included "a small group of exceptional landlords" temporarily waiving rents altogether to one landlord threatening legal action one day after unpaid rent was due.

Businesses are desperate for the Government to unveil a rent relief package. Photo /123rf
Businesses are desperate for the Government to unveil a rent relief package. Photo /123rf

Many others were waiting on a Government announcement before offering help to tenants.

"The most common response from bigger landlords - including the shopping centres - has been we need to wait and see what the Government does," Jacobs said.

With Stats NZ reporting more than 500,000 business enterprises in the country, commercial rent relief now formed as one of the key measures the Government had to tackle to get the economy back on track.

The Franchise Association of NZ said there were more than 630 franchised brands in they country operating around 37,000 individual franchise businesses and many were having trouble paying rents during the lockdown.


"The latest statistics we have available show that turnover within the sector amounts to $27.6 billion, equivalent to 11 per cent of New Zealand's GDP," association chief executive Roby Pickerell said.

More than half of the franchises were in the heavily hit retail, food retail and accommodation sectors along with real estate and support services.

It would be very difficult for many of these to stay in business during the lockdown and beyond while the market slowly recovers, she said.

Despite the tough market outlook, commercial landlords were often still playing hardball, however.

"We are receiving regular reports that even the largest and highest profile shopping centre landlords, who have charged very high rent for years, are threatening legal action for unpaid rent as soon as the next day after the rent was due," she said.

"Many franchisees have no ability to generate income while their premises are inaccessible. They are simply unable to afford to pay."

One store owner at Auckland's Sylvia Park Mall said he was still waiting for help from mall owner and giant landlord Kiwi Property.

Initially, he was sent a letter stating April's rent needed to be paid and was then told Kiwi Property was waiting to see what measures the Government brought in.

"Kiwi Property makes annual profits of $200 million, its CEO is on around $1m salary ... I find it extraordinary these big corporates are expecting Government bailouts," he said.

"I would have liked to see them do their bit right from the start and share in the pain caused by the lockdown buy offering rent relief."

A Kiwi Property spokesman said the company was sorry because "unfortunately" the letter it sent to tenants last week didn't convey its intention to work with tenants not against them.

"We're in discussions with many of our tenants about rent relief and other temporary support options, and encourage any others who are having issues with their rent to contact us about potential solutions," he said.

"We're all in this together and our aim is to ensure our tenants come through this."

The Coffee Club's Jacobs said out of his 66 franchises, about four or five landlords had been exceptionally understanding with generous rent relief offers.

Eleven of his 66 franchises had the Auckland District Law Society's clause 27.5 in their lease agreements that exempted businesses from paying rent in the event a pandemic prevented them from accessing their workplaces.

Yet this clause was largely untested under the law and the commercial landlords were in these cases offering different deals rather than full rent relief, Jacobs said.

In most of the other cases, landlords were still either waiting for the Government to announce a relief package or refusing to give any concession.

"I had a landlord in a tourist town - which is gonna be severely affected for a long time - whose reply to me was if your franchisee seriously can't go a month or two without revenue they should question why they are in business in the first place," Jacobs said.

He said when alert level 4 was lifted, The Coffee Club franchises didn't expect to go back to business as normal.

He expected New Zealand to work its way back through the alert levels rather than opening fully at once and that then there would be a big impact on tourism and Kiwis' abilities to spend on coffee and food.

Jacobs was also hopeful the Australian Government's announcement last night to set out clear rules for how its funding package would be allocated could provide a pathway for New Zealand.

For instance, in the case of businesses like The Coffee Club where income had dropped 100 per cent to zero due to the lockdown, commercial landlords would have to in turn provide 100 per cent rent relief.

This could take a minimum form whereby a commercial landlord would waive 50 per cent of the rent and defer payment of the other 50 per cent.

The other important step was to force landlords to actually negotiate with businesses, Jacobs said.

"Because there are a heck of a lot of landlords out there in New Zealand at the moment who have the legal position to say they don't have to negotiate," he said.

"So the first requirement to say landlords must negotiate in good faith - that is step one."

"It is not going to help small businesses if we have billions of dollars paid out in the wage subsidy scheme only to have thousands and thousands of people lose their jobs anyway because their employer fails," he said.

"Then it will have all been futile.

A summary of key results from the Chamber of Business' Auckland Business Confidence Survey:

* 47% are talking to their landlord in regard to rent relief
* 47% of businesses surveyed are continuing to operate in lockdown conditions
* 70% are confident their business will survive the pandemic
* 9% have made staff redundant as a result of the pandemic
* 77% say government support will help them during lockdown
* 80% have applied for the wage subsidy
* 4% of essential services require new staff