COVID-19

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Commercial Leases

New Zealand is in the fortunate position of being in Alert Level 1. However, it is not without its setbacks and hard times.

Many commercial lease arrangements in New Zealand will have been affected by the response to COVID-19. Tenants may still be struggling to pay their rent as their business is not fully operating. Landlords may also be unable to meet their mortgage repayments. Some of these challenges are likely to continue to some extent.

Some temporary law changes were implemented to support tenants and landlords in this difficult situation. These changes make it easier to retain lease arrangements and get back to business as usual by giving parties time to fulfil their payment obligations before the other side can take enforcement action. These are changes made to the Property Law Act 2007 as part of the COVID-19 Response (Further Management Measures) Legislation Act 2020.

The temporary law change ends at the close of the 6 month period that starts on the date on which the Epidemic Preparedness (COVID-19) Notice 2020 expires or is revoked. The notice was due to expire on 25 June 2020 however a renewal of this principal notice was given and will now not expire until 24 September 2020, unless an earlier date is stated for that purpose by the Prime Minister by notice in the New Zealand Gazette (see section 7(3) of the Epidemic Preparedness Act 2006).

Residential Tenancies

There have also been temporary changes to the Residential Tenancies Act 1986. These changes restrict a landlord’s ability to increase the rent or to end residential tenancies until 24 September 2020. This includes any rent increases about which have already been notified to the tenant, but had not taken effect before 26 March 2020. If a landlord tries to enforce a rent increase before 24 September 2020 they will be committing an unlawful act.

If you are a landlord considering increasing the rent or terminating your tenancy without your tenant’s agreement, we can help with checking whether one of the exceptions applies. Otherwise, further information on residential tenancy issues during COVID-19 is available here.

Mortgages

Policy initiatives have been introduced to provide short-term assistance with loans secured against property, such as the mortgage repayment deferral scheme and the Reserve Bank’s associated removal of its loan to value ratio (LVR) restriction. The LVR restrictions usually limit how much a bank may lend compared with a property’s value. With the current climate, it is likely to be easier to borrow more than 80% of a property’s value. These policy initiatives sit alongside law changes which are designed to slow the process to mortgage default and give you time to recover. Temporary amendments to the Property Law Act 2007 have changed the timeframes for the enforcement of mortgage-related debt. If you are in default of your mortgage, you must be given at least 40 working days to remedy the default before your mortgagee can take control of your property or require its sale. This has been extended from the usual 20 working day period.