fbpx

Reply To: HelloI own commercial property.  One of my tenants has clause 27.5. They told me they were paying nothing, then told me they would pay 50% and weren’t negotiating.They are back in the building, operating as of the 28th and have told me that they will only pay 75% during level 3.If they have full access to he building then how can they expect to only pay 75%?  Does clause 27.5 allow for this?  If it dosent are they I. Breach of their lease and I can go down that route?Thanks

Up
1
Down

Great question and one at the forefront of a number of both Tenant’s and Landlord’s minds right now. We operate a property management company and have spent the best part of April carrying these out and every case is different.

Here is a useful link that adopts a pragmatic approach to this and provides some further insight into the origination of clause 27.5.

https://www.hobec.co.nz/news-resources/2020/april/update-the-adls-lease-and-epidemics

Tenants are more important than ever right now and you will know how attractive your building is to determine how tough of a stance you want to take with your tenant. If it is a highly specialised building, i.e. there won’t be a huge demand pool out the other end of this Covid turbulence, even more reason to work with the tenant.

It sounds as if you feel your tenant is being unreasonable. Ask yourself how important your tenant is to your own financial position and what you would be prepared to do to keep them. Many landlords we have been working with have offered 50% for April and then a further gesture into May and even June to help tenants get back on their feet. The requests of your tenant are not out of line with what we have heard from the market, however, it sounds as if the delivery of their rent discussions could be improved.

Lloyd made a good suggestion to extend the lease term to the value of the concession to the lease tail. It does sound like there is a bit of tension between you your tenant and the best way to win an argument is to avoid it. Tenants will remember their landlords when they needed financial support and if you are front footing the support to your tenant, this goes beyond the legal discussions and looking into the fine print of which there isn’t any for a pandemic and instead, let common sense prevail.

Again, I am unsure of your own financial position and landlords in many instances are left holding the baby in that there isn’t any such discount or relief offered to them from their banks – merely a deferred principal and in some cases, interest plan, but it is still payable in full, so it is a tough pill to swallow.

In my humble opinion if you can financially take the short term hit, do it for the long term gain.

Cheers!

Blair