For anyone involved in commercial letting, whether as a landlord or tenant, the Covid-19 lockdown is undoubtedly a difficult period of uncertainty and financial strain.
Unless you are operating an essential service, such as a pharmacy, petrol station or supermarket, you will have no access to your premises for the duration of the Level 4 lockdown.
The restrictions on access raise a number of legal and practical questions. As a tenant can you maintain any service to your customers? Can you maintain income streams? Are online sales a viable option during lockdown? What obligations do you have to others, including your landlord? As a landlord can you insist on the payment of rent? What about outgoings? Can you attend to essential repairs?
Le Pine & Co, like most other businesses in Taupō, Putaruru and Turangi, has been required to shut up shop for the duration. But we remain open in the virtual sense with all of our staff working from home to provide as full a service as possible; including assisting our commercial clients with their tenancy queries and issues.
Rent
The payment of rent during lockdown has been to the forefront for many clients. If your lease dates from late 2012 onwards and uses the standard ADLS Deed of Lease template, then it will likely provide for an abatement of a “fair proportion” of the rent and outgoings where there is no access to the premises due to an emergency. There is no doubt amongst the wider legal profession that we find ourselves in an emergency situation which triggers these abatement provisions.
Beyond that we are now into unchartered territory; despite the passage of over 7 years since these provisions were introduced following the Canterbury earthquake, no court in New Zealand has issued any judgement or guidance on what is a “fair proportion”. Some will argue it should be 100%, some will argue 0% and others will argue anything in between. Older or bespoke leases will have their own provisions to be examined and evaluated.
It is important to recognise, whether you are a landlord or a tenant, that there is no “one size fits all” remedy. Each situation needs to be examined on its own merits. All relevant facts must be taken into account. Some of these facts will be unique to your own situation. Does the tenant have limited access? Are they using the office server and able to run a semi-normal service remotely? Does the tenant benefit from storage facilities at the premises which are largely not affected by the lockdown? Do parties have insurance covering interruptions to business?
Moving Forward
We find ourselves in a fast changing landscape. The government and Law Society issue new guidelines almost daily. At Le Pine & Co we are committed to providing the best service possible during these difficult times. We recognise that whilst there may be legal rights that can be enforced, that avenue might not be the most appropriate during lockdown. Speed is of the essence and keeping costs to a minimum has never been more important.
Negotiation rather than confrontation is our best tool in reaching an outcome that is in the best interests of our clients. We must bear in mind that the emergency will draw to a conclusion and things will return to normal. We need to ensure that good relationships enjoyed between landlords and tenants are preserved for the long term benefit of both parties. Early intervention allows us to act on your behalf to weigh up the relevant facts and speak to whoever is on the other side to resolve any issues and reach a fair outcome.
If you have any issues, concerns or queries relating to your commercial tenancy and Covid-19, then contact one of our Property Law experts without delay.
Brent Winkelmann: bwinkelmann@lepine.co.nz
Tony Devlin: tdelvin@lepine.co.nz
Simon Gale: sgale@lepine.co.nz
Jennie Burney: jburney@lepine.co.nz (Putaruru Office)
Elizabeth Hussain: ehussain@lepine.co.nz
Kathy Doyle: kdoyle@lepine.co.nz (Turangi Office)
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