Commercial leases “no easy answer”

Local businesses and commercial landlords are being urged to engage with each other, negotiate and explore every possible option for support and relief.

With most shops and offices closed, and all hospitality outlets unable to trade, there are fears on both sides over loss of income and the inability to make lease and rent payments.

One Warkworth chair Chris Murphy said there were no easy answers at the moment, but communication was key.

“It’s a matter of case by case,” he says. “Review your lease arrangement and negotiate with your landlord. There’s no one solution for everybody. The government’s employment packages are proving useful for most people and providing some assistance. But it’s also very difficult for landlords relying on rents for income to grant tenants relief if there’s no assistance for them from government. We’re hoping for more clarity around that.”

MP Marja Lubeck said there were a number of financial packages to help support businesses and protect workers, including a new $6.25 billion business finance guarantee scheme that would provide short-term credit for small and medium-sized businesses.

“The specifics of this initiative are being finalised,” she said on Wednesday (Apr 1). “Details of the scheme will be made public in the coming days.”

She added that there was also a six month principle and interest payment holiday for mortgage holders and small and medium-sized businesses whose incomes had been affected by the economic disruption from Covid-19, details of which could be obtained from banks.

“Where landlords offer substantial rent relief, they are likely to qualify for deferrals of mortgage payments as a result of the resulting fall their revenue, which can help commercial landlords,” she said. “And I encourage tenants to talk to their banks about finance support they may be eligible for and with their landlords.”

Ms Lubeck added there were a number of other tax measures to support cashflow and help businesses continue to operate, including changes to the provisional tax threshold, increasing the small asset depreciation threshold, allowing for depreciation on commercial and industrial buildings and removing the hours test from the in-work-tax credit.

“As an MP, I’m not in a position to provide concrete advice on particular firms’ rental arrangements. I’m aware that some leases involve clauses around lack of access to commercial premises in an emergency, and around some rent relief when there’s no access. But these clauses vary from lease to lease,” she said.

“I encourage landlords and tenants to seek legal advice, and above all else engage with each other in good faith. Given the unprecedented situation we’re in, early and honest discussions between tenants and their landlord are critical. The landlord and tenant may be able to reach agreement on a rental holiday or reduced rental payments.”

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