Some Kiwi businesses may not have to pay their office rents during the coronavirus lockdown, depending on what their lease agreements say. Photo / 123rf
Some Kiwi businesses may not have to pay their office rents during the coronavirus lockdown, depending on what their lease agreements say. Photo / 123rf
Hundreds of thousands of Kiwi businesses and commercial property owners will be scrambling to check their leases to see whether rents will still have to be paid during the coronavirus lockdown.
A leading legal expert says many Kiwi businesses will have clauses in their lease agreements stating they do not have to pay rent to landlords if they are unable to access their workplaces.
This included businesses using the standard version of the popular Auckland District Law Society's commercial deed of lease, which included wide-ranging clauses, such as an epidemic, as grounds for suspension of rent, Jane Holland, a partner at law firm Bell Gully, said.
"But that is not all tenants by any means, and it is going to depend on what the tenants particular lease says as to whether they have to continue paying the rent during the level four alert," she said.
"And obviously it is a difficult situation for landlords because they may not be expecting tenants are going to stop paying rent in that situation, but tenants might be entitled to."
Some Kiwi businesses may not have to pay their office rents during the coronavirus lockdown, depending on what their lease agreements say. Photo / 123rf
With rent suspension clauses potentially varying from tenancy to tenancy, many businesses and commercial landlords were likely in for a surprise if they hadn't read their lease's fine print.
Stats NZ data showed there was more than 500,0000 business enterprises in New Zealand.
Commercial landlord Julian Swier was among the scores of Kiwis laden with mortgage repayments, while also trying to keep a small business running through the lockdown.
Yet he had been approached "left-right-and-centre" by commercial tenants wanting rent reductions.
He was keen to try and help but said he had tens-of-thousands of dollars in mortgage repayments each month that needed to be met.
Bell Gully's Holland said landlords whose tenants were entitled to stop paying the rent should check their business insurance to see whether it covered the shortfall.
Similarly, businesses that discovered they must keep paying the rent throughout the lockdown, even though they can't access their workplaces, should check whether the business disruption insurance covered the payments.
Holland said the clauses built into the leases to allow businesses to avoid rent during specified crises or emergencies started after the Christchurch earthquakes.
During that period some businesses renting offices that weren't damaged by the quakes but were located within cordoned off areas were shocked to discover they still had to pay rents even though they couldn't use the buildings.
"So since the Christchurch earthquakes a lot of leases - but not all - have had clauses Introduced to them which state if the premises are inaccessible, the tenant doesn't have to pay rent," she said.
"Not all landlords have adopted those clauses in their leases, however, so even some modern leases won't have those sort of provisions in them."
