The Government has been slammed by the Property Council for introducing tenancy termination restrictions during COVID-19 alert levels "without notice or consultation".
Justice Minister Kris Faafoi quietly introduced temporary measures on Tuesday to "help ease the impacts of COVID-19 restrictions" on both commercial and residential tenancies.
The Government plans to ban residential tenancies from being terminated under alert level 4, and will make it mandatory for commercial landlords to compromise on rent with their tenants during other alert level restrictions.
"With regards to commercial rental situations, we have heard the concerns from business operators unable to meet full rental costs while their incomes have been hit by COVID restrictions needed to contain the spread of the virus," Faafoi said.
"Therefore an amendment to the Property Law Act is proposed to 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.
"Landlord and the tenant would need to agree on the amount of rent that is fair."
Arbitration, or dispute settlement, will be required where landlords and tenants are unable to come to agreement about a fair rent proportion, unless they agree to an alternative dispute resolution process such as mediation.
The changes came as a surprise for Property Council chief executive Leonie Freeman, who said property owners and tenants have "suddenly had their contracts changed without notice or consultation".
"Today's proposal to amend the Property Law Act to insert a clause into commercial leases is a kick in the teeth for the backbone of the nation," Freeman said.
"What the Government fails to realise is that these property owners are the same people who are working hard to keep construction, development and housing projects going. They have effectively dropped a bomb on their most vital industry.
"This proposal completely misses the intricacies of commercial leases. Where is the bespoke response for hospitality or retail? Why aren't we focusing on where the need is the greatest?
"There's also the added ambiguity of what a 'fair' proportion of rent relief looks like. While many landlords and tenants might be able to come to an agreement, many others will fail to find a middle ground, creating plenty of work for our legal community, something our politicians seem to have difficulty understanding."
Freeman said it's also too late, particularly the ban on residential tenancies from being terminated under alert level 4, since the Government has signalled its intention not to use that alert level in the future.
"To put a proposal like this on the table 40 days into the current lockdown and nearly 18 months after this issue was raised is simply too late in the piece.
"It sends a very poor signal to the investment community when it appears a commercial contract is worthless depending on who is in power."
The changes are to be considered as a part of a short select committee process. The Government is encouraging those affected to make submissions, including from when the commercial rent clause should be effective, which is September 28.
Associate Housing Minister Poto Williams said the ban on residential tenancies from being terminated under alert level 4 will be able to be switched on and off by ministerial order, "making the new changes flexible and responsive".
"This is about future-proofing tenancy law and provides much-needed certainty and clarity for landlords and tenants."
