Rent Abatement Under NZ Leases and COVID-19

Abatement is a right to adjust the rent and sometimes outgoings according to the circumstances for a period of time. Whether it applies in NZ’s COVID-19 Alert is dependent on the contractual clauses in your lease agreement, and how NZ’s COVID-19 Alert impacts your ability to access and use of the premises.

Requirements

A right to abate rent and outgoing payments may apply to you if you are required to cease conducting your business from your premises during COVID-19; and you have:

• an ADLS “Deed of Lease”, sixth edition 2012 with a clause headed no access in emergency.; or
• an ADLS “Agreement to Lease” entered into in any time from 2012 or later that states that the lease shall be documented on the current ADLS Deed of Lease form, and
• the relevant clause hasn’t been excluded or amended in a way that it won’t apply.

If this applies to you, then you may be relieved of the obligation to pay the full amount of your rent and outgoings while we remain at COVID-19. Some other forms of lease may also have a similar right.

Limits

No Access In Emergency provision provides that a tenant is entitled to a fair abatement of rent and outgoings where:

• if there is an non-contentious emergency;
• you are unable to gain access to the premises to fully conduct your business; and
• that access is restricted because of reasons of safety to the public or the need to prevent, reduce or overcome any hazard or harm.

In relation to any right in a lease to abate, you’ll need to make a judgement on:

I. whether your inability to gain access to the premises to fully conduct business applies to your type of “non-essential business” during just Covid Alert; and

II. what a fair portion of rent and outgoings to abate should be.

For many tenants with a 100% restriction on operating their business from the premises, a fair portion to abate may well be 100% of your rent and outgoings – but this is not certain and will depend on your individual circumstances and may be argued to the contrary by landlord. Ultimately this will be down to an objective test.

If you have applied too high of a percentage – you will be liable for the shortfall, which could put you in breach of your lease. If in doubt, seek advice. While a 100% abatement of rent may be fair, a 100% abatement of outgoings may not be fair. This will depend on your own particular circumstances.

Negotiate a Better Deal

Instead of abatement now, you may want to try and open up a wider discussion to negotiate a better deal with your landlord. Government announcements about mortgage holidays and some moves in respect to bank business loan relief may help your landlord help you too. Be conscious it may take some time for your landlord to be able to respond – but hopefully many are in a position to respond.