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covid-19, lockdown and your commercial lease - what's the go?

28 Apr 2020

As of midnight, on Wednesday 25th March, an unprecedented number of NZ businesses were not able to access their business premises due to Government restrictions to prevent the spread of Covid-19.

 

If your lease is on the current (sixth) edition of the Auckland District Law Society (ADLS) form of lease, it is likely to contain a “no access” clause allowing for a reduction in rent where there is an emergency and the tenant can’t gain access to the premises to fully conduct the tenants business from the premises.

 

but what does this mean for you?

An inability to access premises does not automatically equal a 100% reduction in rent and outgoings for the shutdown period. The reduction in rent will be different in each situation and will depend on the financial impact on the tenant and landlord, and to what extent the premises is being used during lockdown.

 

Some businesses that can continue their business remotely whilst a bar or restaurant for example may have a 100% reduction in revenue for the period. The tenant will need to provide evidence to support any claim for rent reduction.

 

Any decisions around rent reductions will need to be negotiated in good faith with either your landlord or your tenant. You will need to consider the long-term costs and implications.

 

Landlords may wish to prioritise the survival of the tenant over a short-term rental loss.

 

Please note, if your lease is an older lease you probably will not have the ability to negotiate your rental under the lease. The new provisions providing for an emergency situation have only been added to the lease following the Christchurch earthquakes. If you lease an older version you can ask your Landlord for a reduction, however there is no obligation on them to give it to you. Again, both parties will need to work together in good faith.

 

For further advice and assistance during your negotiations please contact us on info@arnetlaw.co.nz

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