Covid 19 coronavirus: Many firms refuse to pay rent through the crisis

All landlords want to see businesses survive, says Leonie Freeman, chief executive of the Property Council. Photo / Doug Sherring

Many large businesses have unilaterally informed their landlords that they won't be paying the rent through the nation's lockdown and that could devastate the commercial, industrial and retail property sectors, the Property Council New Zealand said.

The council represents the owners of commercial property and says its members need support to keep the economy moving both during the shutdown, which is aimed at stopping the coronavirus from spreading, and after the shutdown ends.

"As property is the home of business, any crisis that affects businesses will also affect property owners," said council chief executive Leonie Freeman.

Freeman said the Government does need to step in. "We think Government is a key part to help provide a solution."

The council is hearing about multiple scenarios, including hearing from many landlords who are working constructively with tenants in discussing rent relief, including postponements to outright cuts in rents, through to those refusing to pay.

"The biggest issue with this is that we need everybody to come out of this. We need businesses to survive and landlords need to survive," Freeman says.

"Once we get through Covid-19, we don't want to see we've lost a whole lot of businesses. Equally, we don't want to see a lot of property owners being foreclosed on," she said.

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Freeman acknowledged the speculation about the business interruption clause in the standard Auckland District Law Society lease which was added after the Christchurch earthquakes and which is widely used for commercial leases throughout New Zealand.

But Freeman said whether or not leases include this clause, "we would encourage owners and tenants to negotiate in good faith what a fair proportion of rent is."

She said the Government's reintroduction of depreciation on buildings was a positive move but it doesn't solve the immediate situation in which both landlords and tenants need support through the lockdown.

"It is simply not enough to bridge the gap in what is becoming a crisis of cash flow for many property owners."

• Covid19.govt.nz: The Government's official Covid-19 advisory website

Freeman said we need to think about the issues in three ways. "There's the legal position, and that's the lease. Then after that, there's the commercial position. All our landlords want to see the businesses survive.

"And then there's the ethical position. What's the right thing to do, not only for the property owner and tenant, but for the wider community."

Freeman praised the Government for the job it has done in such a challenging situation. "It's happened so fast I think everyone's just reeling."

In a brief statement, Greg Loveridge, managing director of Robert John Holdings' Auckland office, said the property company has a large number of tenants, some of whom have a clause in their tenancy agreement that allows them to pay a proportion of their rental.

He said the company had agreed for them to pay 50 per cent, "we think that is fair."