National MP Andrew Bayly urges relief to landlords and tenants
Andrew Bayly
Wellington, September 2, 2021
Small business owners need help urgently so that they can survive this Covid-19 lockdown and any future lockdowns so that they can continue to play a significant role in New Zealand’s economy as well as providing employment all over the country.
I am hearing from small business owners and representative organisations everyday about the sky-high levels of anxiety and stress Kiwi business owners are experiencing, particularly those in Auckland who face at least another two weeks at Level 4.
The wage subsidy and Resurgence Support Payment have helped small business, no doubt, but rent is the most significant cost and while some commercial landlords are cutting their tenants slack, others are not.
The RSP doesn’t really go far when you factor in significant costs like unexpected stock wastage, insurance, rates, and the fact that the one-off payment is dependent on the number of FTEs a business has.
Uncertainty over lockdown
This outbreak is likely to continue for a number of weeks and many businesses will have to wait until Level 2 to be even partially operational. Not to mention the uncertainty of whether we will face more lockdowns in the future.
I have developed a proposal for a Rental Support Package and I urge the government to adopt to take pressure off both tenants and landlords. A majority of OECD countries have some form of Covid-19 rental support for SMEs and I want to secure the same for Kiwis.
Under my Support Package, small businesses who have seen a 40% reduction in their revenue under either Level 4 or 3 will be entitled to 50% of their assessable rent and associated building operating costs paid by the Crown, on the proviso that the landlord contributes a 25% discount on the rental costs for the duration of the period the Rental Support Payment is provided to the small business owner.
This would leave the just 25% of the rental costs to be paid by the tenant.
In order to ensure any rental disputes can be settled quickly, the government will prioritise emergency arbitration services when requested by either the Tenant or Landlord.
It is important that business owners and landlords have a clear process to reaching an outcome quickly.
(RNZ Photo of Oriental Parade, Wellington by Samuel Rillstone)
Hospitality sector support
Hospitality New Zealand Chief Executive Julie White said that this Rental Support Policy would offer protection to small businesses, greatly lessening the likelihood of business closures, impacting jobs and communities for years to come.
“Hospitality and accommodation operators have been accumulating losses for over seventeen months due to Covid-19. They are especially doing it tough right now, most operating with zero revenue in Alert Levels 4 and 3 and operate at severely reduced capacity during Level 2,” she said.
Brad Jacobs, Director of The Coffee Club, has spent the last 18 months supporting franchisees through battles with landlords; some of them huge, off-shore multi-nationals.
He reached out to me after receiving little support from government Ministers.
“I don’t want to see another franchisee shut down. For many of them, the lockdowns and battles with landlords feel like death by a thousand papercuts. Andrew’s Rental Support Package would make a huge difference,” Mr Jacobs said.
Alleviating hardship
I am calling for the Finance Minister to accept my offer of this proposal. This is about alleviating hardship on businesses and preventing the harmful knock-on effect on the economy and society should businesses fall over.
The policy could draw down on any remaining unallocated balance in the government’s Covid Response and Recovery Fund. It is clearly in support of an economic response to Covid-19 with demonstrable economic benefits, unlike a lot of the spending that has been funded out of the CRRF to date.
To date, the following organisations have given their support for Mr Bayly’s proposal: Business New Zealand and their Employer & Manufacturing Partner organisations, Retail New Zealand, Hospitality New Zealand, Restaurant Association of New Zealand and Franchise Association of New Zealand
Policy Principles
In designing a possible proposal, Mr Bayly has adopted the following principles.
The policy (1) Must be simple to understand and implement. It should be easy to figure out who qualifies, who does not, and how much they are eligible for (2) Should only apply to businesses who suffer a significant loss of revenue due to a Covid lockdown (3) Should not discourage landlords from cutting deals with tenants, like we have seen them do before (4) Should only apply to Small Businesses Enterprises (SMEs), defined New Zealand as enterprises with 19 or fewer employees. They currently comprise about 97% of all enterprises.
Small Business Rental Support Proposal
An SME (‘Tenant’) would only be eligible for the Rental Support Payment if they had a reduction of at least 40% of their revenue compared to pre-lockdown levels (as is required to meet the current Wage Subsidy Scheme).
The Tenant will not be entitled to the Rental Support Payment if it has in place a relevant or equivalent ADLS ‘Unable to Occupy’ clause.
The Tenant will be entitled to 50% of their assessable rent and associated building operating costs (‘Rental Costs’), provided that the landlord is willing to match the Crown contribution by agreeing to a 25% discount on the Rental Costs for the duration of the period the Rental Support Payment is provided to the Tenant.
The Rental Support Payment shall be capped at a maximum of $10,000 per month (being 50% of the total monthly rent)
The government will prioritise emergency arbitration services when requested by either the Tenant or Landlord to quickly resolve disputes.
Mr Bayly said that he has spoken to a number of entities and there is strong support for a policy that gives clarity for both the tenant and landlord.
Andrew Bayly is Member of Parliament (National Party) elected from Port Waikato. He is the Shadow Treasurer (Revenue) and the Party’s Spokesperson for Infrastructure and Statistics.
