While Little announced the deal as being one of the Government, NZ First has already made clear it is opposed, with a spokesman saying the unusual solution - using the Public Finance Act to avoid the need for a law change was "very Muldoonesque".
National said businesses were the victims of coalition inflighting.
Meanwhile one landlord which has publicly lobbied against Labour's proposal described the move as "a nothing announcement" because landlords could refuse requests to negotiate if they wished.
Voluntary mediation
Little described the deal as "a voluntary scheme of subsidised mediation" which would apply only to business with 20 or fewer full-time equivalent staff per lease site, are New Zealand based and have not come to an agreement with their landlord on rent relief.
"It is critical that businesses who have not reached an agreement be assisted to find a solution that will help New Zealand recover from the economic impacts of Covid-19," Little said.
"This funding will ensure that tenants and landlords, even if financially constrained, will be able to access dispute resolution services."
NZ First told the Herald that it remained opposed to the deal and had not consented to the announcement. The party believed it had twice reached negotiated settlements with one Labour Minister - understood to be Minister for Small Business Stuart Nash - but Nash could not get agreement of his colleagues.
"We still maintain the so-called problem of commercial leases remains unstated, unquantified, and not understood," a spokesman for NZ First said.
"We continued to reject the heavy state imposition of arbitration, subsidised or not, as it won't help money flow quicker and commercial lawyers have told us the moneyed party will merely see arbitration as a weigh station to litigation (so will prove ineffective)," the spokesman added.
The party believed it had maintained a "principled critique of the policy" and its refusal to agree to a legislative fix was based on concerns that it would "interfere in the sanctity of contracts or for the unquantified or scoped up policy problem".
Minister of Finance Grant Robertson and Little have had "resorted to the Public Finance Act to throw another $40 million at a problem we've never felt they understand" the spokesman said. "Very Muldoonesque".
Little laughed when told of the characterisation.
"That's interesting from someone who was a student of Muldoon," Little said.
"I don't think it is at all. We had a Cabinet agreement on what to do and in spite of the principle of Cabinet collective responsibility, New Zealand First walked back on that.
"There's a lot of criticisms we could make on all this stuff and perhaps the individuals involved in this. In the end it was very clear there was a proportion of the commercial tenant and, frankly, landlord community that needed assistance.
"We've struggled to find a way to provide that assistance. This is where we got to."
National's finance spokesman Paul Goldsmith said businesses struggling with the impact of Covid-19 had been the victims of months of coalition infighting.
"It's very strange that the government would spend $40 million on a project that one of the coalition partners doesn't support," Goldsmith said.
"At a time of economic crisis, when we're losing tens of thousands of jobs, we need coherent and disciplined government, not the infighting that we are seeing between coalition partners this week."
'Lacks virility' - landlord
Troy Bowker, executive director of Wellington-based Caniwi Capital, which owns a number of commercial properties, has previously attacked Labour's plans.
Today Bowker - whose company has to donated NZ First - said the end result mattered little to landlords.
"Thanks to Winston Peters, the Justice Minister has failed to force state interference in commercial leases so his consolation prize is to throw $40m of taxpayer money at the arbitration and mediation industry," Bowker said in a statement.
"This proposal lacks virility as all it does is provide funding to assist in resolving disputes but critically it does not compel either landlord or tenant to reach agreement.
"This is of very little consequence other than to a few mediators. Almost all rent negotiations have already been concluded" because leases included clauses which covered the lockdown, or the parties had reached voluntary agreements.
"The original proposal from Andrew Little was straight from the Muldoon era of state interference in private contracts and would've set a very dangerous precedent. It was rightfully kicked into touch by NZ First."
Protracted battle
Since April, senior Labour ministers have been promising to offer relief to commercial tenants.
Over time, however, the Government has been softening its public statements on the issue, with Jacinda Ardern saying that at times landlords were vulnerable to the actions of major tenants.
Eventually a deal was reached, although it appeared that a last-minute change meant that NZ First may have been unaware what it signed up to.
When it was announced, NZ First leader Winston Peters insisted the deal represented a victory for his party, mocking Labour's position.
Little would later respond that the proposal NZ First had come up with was "laughable" and what was ultimately agreed was what Labour wanted in the first place.
Weeks later, NZ First pulled support from the deal, claiming draft legislation was different to what it had signed up to, without being precise on how.
Little later confirmed that negotiations were back under way on June 24.
In the weeks following it appeared a deal was unlikely, with senior NZ First MPs telling figures following the situation that the deal was "dead".
In a sign of deteriorating relations with Little, Peters told NewstalkZB that Stuart Nash, the Minister for Small Business, was heading the negotiations, saying the matter had nothing to do with the Justice Minister.
Sources within Labour indicated they were willing to negotiate a deal with NZ First but were struggling to understand what NZ First wanted.
