Tenancy measures introduced to further support Covid impacted businesses and tenants

  • Hon Kris Faafoi

The Government has introduced changes to help ease the impacts of COVID-19 restrictions on both commercial and residential tenancies.

As part of the COVID-19 Response Legislation Bill introduced to Parliament, measures are being taken to help businesses resolve disputes over commercial rent, as well as provide greater certainty for landlords and tenants by protecting residential tenancies from being terminated during COVID-19 Alert Level 4.

“With regards to commercial rental situations, we have heard the concerns from business operators unable to meet full rental costs while their incomes have been hit by COVID restrictions needed to contain the spread of the virus,” Justice Minister Kris Faafoi said.

“Therefore an amendment to the Property Law Act is proposed to insert a clause into commercial leases requiring a ‘fair proportion’ of rent to be paid where a tenant has been unable to fully conduct their business in their premises due to the COVID-19 restrictions.

“Landlord and tenant would need to agree on the amount of rent that is fair. They could also agree that the clause does not apply,” Kris Faafoi said.

Arbitration will be required where landlords and tenants are unable to come to agreement about a fair rent proportion, unless they agree to an alternative dispute resolution process such as mediation.

Once the law is passed, the implied clause would take effect from today, 28 September 2021.

“The proposed law change would only apply to leases which do not already provide for adjusted rent payment terms during an epidemic emergency. Therefore, agreements made prior to 28 September 2021 to adjust rent obligations to reflect the COVID-19 situation would not be affected by the implied clause,” Kris Faafoi said.

“This change helps to ensure that landlords and tenants come to reasonable agreements about rent obligations, while still respecting agreements that have already been made.

“In principle agreements need to reflect the uniqueness of the current COVID-19 situation, and provide the means by which both landlords and tenants can share the financial burden of the impact of COVID-19 restrictions.

“The Residential Tenancies Act changes will enable restrictions against residential tenancy terminations to be switched on and off by Ministerial order – making the new changes flexible and responsive,” Associate Housing Minister Poto Williams said.

“This is about future-proofing tenancy law and provides much needed certainty and clarity for landlords and tenants,” Poto Williams said.

The changes are to be considered as a part of a short select committee process on the COVID-19 Response Legislation Bill and Ministers encourage those affected to make submissions, including from when the commercial rent clause should be effective.

Notes on Residential Tenancies Act changes:

The legislation will be similar to the no tenancy termination measures in place last year, but with some key differences:

Tenancy termination restrictions will not apply for a fixed period of time. Instead, the restrictions will be able to be switched on and off by Ministerial order.

  • Existing termination notices will not be cancelled. For most tenancies, the notice period will continue to run while the restrictions are in place, but after the restrictions lift, tenants will get a top up to a minimum of 28 days’ notice.
  • This legislation will not include a rent increase freeze like last time. The Government has made multiple changes to improve the security and rights of renters, including limiting rent increases to once a year, (which came into effect on 12 August 2020). This was not in place during the last lockdown.

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