COVID-19 - Commercial Landlords and Tenants
Current at 31 March 2020
An interesting challenge for commercial landlords and their tenants (business owners) is how to deal with rental payments during a period where the business is effectively locked out of the premises through Government Alert Level 4 requirements.
The New Zealand Property Council suggests that there are three aspects to consider when approaching solutions:
Contractual position – that is the lease agreement and its provisions
Commercial position – the need to keep landlords and tenants in business
Ethical position – what is the right thing to do for the parties concerned and our wider community
Tenants should have an early discussion with their landlord if they are likely to have difficulty paying their lease. This may include a discussion around a rent holiday or a period of reduced rent. Simply not paying the rent is unlikely to be the best approach.
It is important to review the lease agreement – a “no access in an emergency” provision was added to the standard ADSL lease in 2012 following the Canterbury earthquakes, this may mean you don’t have to pay if you can’t access the building, but every agreement will be different – it is very important to seek legal advice.
Tenants and landlords should both review their business interruption insurance to see if they are covered for rental payments. Speak to your insurance broker for specific advice about your policies.
Landlords with mortgages can contact their bank to see if they are eligible for an interest-only period for term loans, or a mortgage holiday (which means the payment of both interest and principal is delayed for several months).
Commercial landlords may be entitled to receive the COVID-19 Wage Subsidy if they are experiencing a loss of rental income due to COVID-19. The subsidy applies to the self-employed as well as companies and provides $585.80 pw if you work 20 or more hours in the business, or $350 pw if you work less than 20 hours.
One of the key criteria for eligibility is “the business has experienced a minimum 30% decline in actual or predicted revenue over the period of a month, when compared with the same month last year, and that decline is related to COVID-19”. Read full details here and the Wage Subsidy Declaration here before deciding if you are eligible.
The Government is regularly updating it’s position on providing support and new rules and regulations for everyone affected by COVID-19. Ensure you keep up to date with Government announcements as the position will likely change.
Commercial buildings can be depreciated from the 2020/21 tax year. From 17 March 2020 there is also a tax deduction for assets costing under $5,000, this reverts to $1,000 18 March 2021. Both will assist landlords longer term but will not help with immediate cashflow.
If you have any questions or need immediate assistance please email us at firstname.lastname@example.org