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Honey Bees Preschool: The Law against Penalties Confirmed

On 5 June 2020, the Supreme Court issued its decision on an appeal by 127 Hobson Street Limited (127 Hobson) against the Court of Appeal’s finding that a requirement to indemnify lessee Honeybees Preschool Limited (Honey Bees), for all financial obligations incurred under a lease as a result of 127 Hobson’s failure as lessor to install an elevator, was not an unenforceable penalty...

Honey Bees Preschool: The Law against Penalties Confirmed

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Honey Bees Preschool: The Law against Penalties Confirmed

Honey Bees Preschool: The Law against Penalties Confirmed

On 5 June 2020, the Supreme Court issued its decision on an appeal by 127 Hobson Street Limited (127 Hobson) against the Court of Appeal’s finding that a requirement to indemnify lessee Honeybees Preschool Limited (Honey Bees), for all financial obligations incurred under a lease as a result of 127 Hobson’s failure as lessor to install an elevator, was not an unenforceable penalty.


The issues on appeal involved an examination of the scope of the current rule against penalties in New Zealand and whether the clause in question constituted an unenforceable penalty.

Upholding the Court of Appeal finding, the Supreme Court has usefully re-stated the law on penalties in New Zealand.

Background

Honey Bees runs a childcare centre in central city premises leased from 127 Hobson. When the Deed of Lease was entered into, the parties also entered into a separate agreement under which 127 Hobson and its director agreed to install a second lift in the building to facilitate the arrival and departure of children at the central city high rise preschool.

This agreement included a provision whereby both 127 Hobson and its director agreed that in the event this second lift was not operational by 31 July 2016, Honey Bees would be indemnified against all rent and outgoings it incurred under the lease until its expiry.

The Supreme Court looked at the circumstances around entry into the overall transaction, examining why the separate second lift agreement was central to the lease’s suitability.

What is the scope of the rule against penalties in New Zealand?

The Supreme Court summarised the rule against penalties as follows:
 

  • A clause will be an unenforceable penalty if a consequence is out of all proportion (exorbitant) to the legitimate interests of the innocent party in performance of the primary obligations.

  • Determining if the clause is an unenforceable penalty requires an objective exercise of construction, undertaken at the time of contract formation, and by reference to the terms and circumstances of the contract (including commercial context).

  • A legitimate interest to be weighed includes any consequences designed to protect the interests of the party in performance of the primary contractual term.

  • A party’s legitimate interests may extend beyond the loss caused by the breach as would be measured by a conventional assessment of contractual damages, i.e. the four corners of the contract.

  • Legitimate interests will not include objectives unrelated to the performance interest – including punishment – but deterring a breach can be a legitimate objective of the clause.

  • The respective bargaining power of the parties is relevant, including whether legal advice was obtained.

  • It is not always necessary for the court to assess damages – but there will be cases where such a monetary calculation will be the appropriate measure of the innocent party’s interest in performance.

Was the indemnity clause an unenforceable penalty?

To answer this, the Court looked at Honey Bees’ legitimate interests and found that the only relevant interests were those that flowed from a failure to install a second lift on or before the due date. As the preschool was operating on the fifth floor of a busy high rise building, children and parents would be arriving and leaving within concentrated blocks of time. Honey Bees was looking to increase the capacity of its preschool over the forthcoming years. This was important to the commercial success of the venture.

The Court also found that there was no discrepancy in the parties’ respective bargaining powers.

The Court agreed with the Court of Appeal’s finding that, despite the ‘all or nothing’ nature of the indemnity clause, the consequences of the indemnity being triggered were not out of all proportion to the legitimate interests secured, and therefore the clause was not an unenforceable penalty.

Other issues

This Court also read the wording “all obligations” as applying to only “payment obligations”, i.e. Honey Bees was indemnified against all its financial obligations under the lease but the agreement did not give Honey Bees a right to breach its own obligations under the lease.

It is worth noting that the Court confirmed the general understanding in property law that rights of renewal of leases are in fact grants of a new lease, not an extension of the existing lease. Therefore the indemnity provided under the indemnity agreement only applied to the initial term of the lease, rather than a 24 year period including all renewals.
 
10 July 2020


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Overseas Investment – New Temporary Notification Regime: Treatment of Property Transactions and Process

The Overseas Investment (Urgent Measures) Amendment Act 2020 (Urgent Measures Act) came into force on 16 June 2020, bringing into effect the temporary notification regime...

Overseas Investment – New Temporary Notification Regime: Treatment of Property Transactions and Process

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Overseas Investment – New Temporary Notification Regime: Treatment of Property Transactions and Process

Overseas Investment – New Temporary Notification Regime: Treatment of Property Transactions and Process

The Overseas Investment (Urgent Measures) Amendment Act 2020 (Urgent Measures Act) came into force on 16 June 2020, bringing into effect the temporary notification regime.


The manner in which the temporary notification regime applies to property transactions and how a change of control is calculated has now been clarified by the Overseas Investment Amendment Regulations 2020 (Regulations). In addition, the Overseas Investment Office (OIO) has recently published details of what information is required when making a notification to it and provided some additional guidance.

When is notification requirement triggered?

One of the key things achieved by the Regulations is to clarify when various property transactions require notification to the OIO.

The Urgent Measures Act provides in section 82(2)(b), that, an acquisition of property by an overseas person used in carrying on business in New Zealand that effectively amounts to a change in control of that business, as defined in the Regulations, is subject to the temporary notification regime. The Regulations define what is meant by a change in control of the business, and here take a novel approach. Change in control is to be assessed by reference to what proportion of the counterparty’s (i.e. the vendor’s or lessor’s) total assets are being acquired. A “change in control in relation to the acquisition of property used in carrying on a business” is where the value of the property being acquired is more than 25% of the value of all New Zealand property owned by the person from whom the property was acquired, as assessed immediately before the acquisition. If this threshold is exceeded, the transaction must be notified.

This means that both the purchase of land, as well as the entry into a lease (being an acquisition of an interest in land), will be subject to the temporary notification regime and require notification to the OIO if they involve more than 25% of the counterparty’s total assets.

The value of property is to be determined by reference to the most recent financial statements, accounting records and all other circumstances which affect the value of the property. Reliance may be placed on valuations that are reasonable in the circumstances.

Further, value is to be determined by reference to the assets of the actual counterparty, not its related companies. If a particular property asset is held in a special purpose vehicle, as is often the case, regard cannot be had to the total value of group assets.

It is quite possible that a counterparty will resist having to provide its confidential financial information. If so, one solution would be to include a warranty that the threshold is or is not met, and if need be, proceed, or not proceed, to notification accordingly. The OIO has indicated it will be providing further guidance here shortly.

Incorporating companies

One thing to watch out for in relation to the application of the notification regime to business transactions generally is that it covers any acquisition of securities by an overseas person. Strictly speaking, this covers even the uncontroversial incorporation of a New Zealand subsidiary of the overseas person, without even any business transaction occurring. We expect the OIO to issue some further guidance on this, as it has agreed that a simple company incorporation should not be covered.

A few process comments

If it is determined that a transaction is subject to the temporary notification regime, notification to the OIO is to be made prior to giving effect to a transaction. A transaction may be entered into before notification, provided the transaction is conditional on receiving a direction order from the Minister. Transactions entered into before 16 June 2020 are not subject to the temporary notification regime at all.

The notification process is completed online via an online form on the OIO’s website. The information required includes:
 

  • details of the overseas investor (including an ownership structure diagram);

  • copies of the passport identity page for each individual director or trustee of the acquiring entity or individual involved in the transaction;

  • details of the transaction;

  • details of the business being invested in or the interest being acquired;

  • the value of the assets or interest being acquired; and

  • financial statements for the previous two financial years.

This information must be submitted with the online form and cannot be sent separately to the OIO. No fee is payable.

Unless the OIO makes appropriate changes to its online form, the process for completing it will remain clunky. All the information needs to be gathered, and ready for upload as required, in advance. No provision has been made for the counterparty to submit its financial information privately, on a confidential basis. There is no ability to provide additional material (for example a statement that the counterparty refuses to provide financial statements, or a letter explaining any necessary departure) and there is a tick-box requirement that the party submitting confirms that all required information has been included in the notification (without which the online submission will not work).

Once a transaction has been notified, the OIO will conduct an initial review and make a recommendation to the Minister of Finance, who will decide whether the transaction is contrary to the national interest. No delegation of this decision-making power has been made, regardless of transaction value, and if all parties comply then it is possible to foresee a bottleneck arising at the ministerial level. This initial review is expected to be completed within 10 working days, although the legislation does actually provide for the initial review to take up to 40 working days, with provision for extension by the Minister for a further 30 working days.

A notified transaction cannot progress until a direction order is issued. The Minister may:
 

  • make a direction order that no conditions are imposed (and therefore the transaction may proceed);

  • make a direction order imposing conditions on the transaction; or

  • make an order prohibiting the transaction from being given effect.

If it is found that further assessment is necessary, the transaction will be subject to a detailed review against the national interest test. This is a discretionary power, and guidance on this test notes that considerations are to be given to a range of factors and the likely impact of the investment.

The OIO expects the majority of transactions to be able to proceed without any intervention. However, as the notification requirement effectively amounts to a temporary ministerial power of veto over transactions, at the very least resulting in potentially significant delay, the new regime is of concern to business.

Thankfully the new emergency notification regime is only temporary and an assessment of the regime is to commence by the end of July to ensure that classes of transactions subject to the regime are not broader than reasonably necessary. Further, the emergency notification regime will be reviewed by the Minster at 90 day intervals to ascertain whether the effects of the pandemic justify the regime remaining in place. Where it is determined, the emergency notification regime is no longer required, this will be replaced by a permanent call-in power (see our previous article here for details of this).

Please contact Brigid McArthur or one of our lawyers in our Property team if you would like help on interpreting the temporary notification regime and the recent changes to the Overseas Investment Act.

10 July 2020


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Decision not to offer surplus PWA land back to a former owner was not lawful

Navigating the Public Works Act 1981 (PWA) can be difficult for both landowners and the government agencies charged with developing public works, especially when divesting surplus land. Recently, the Court of Appeal provided some clarity about the obligation to offer surplus land to its former owner, when that former owner is a company which has been removed from the companies register...

Decision not to offer surplus PWA land back to a former owner was not lawful

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Decision not to offer surplus PWA land back to a former owner was not lawful

Decision not to offer surplus PWA land back to a former owner was not lawful

Navigating the Public Works Act 1981 (PWA) can be difficult for both landowners and the government agencies charged with developing public works, especially when divesting surplus land. Recently, the Court of Appeal provided some clarity about the obligation to offer surplus land to its former owner, when that former owner is a company which has been removed from the companies register.


In Aztek Limited v Attorney-General [2020] NZCA 249, the Court of Appeal held that, even though the company former owner had been removed from the companies register, the chief executive of Land Information New Zealand (LINZ) should have enquired into the ability to make an offer to that company. The chief executive’s decision, made in February 2011, that it would have been “impracticable” to sell the land to that company was set aside and the chief executive is now required to reconsider that decision.

The case relates to properties acquired from Aztek Limited for the “Avondale Extension” (later known as the Waterview tunnel project) by agreement in 2005. As Aztek’s only significant asset was that land, the directors of the company had ceased filing annual returns and the company was removed from the companies register in March 2009. In November 2010, NZTA decided that the land was no longer required for the Avondale Extension and, on 21 February 2011, the chief executive of LINZ approved an offer-back exemption under section 40(2)(a) of the PWA. This section provides an exemption to the standard rule that land must be offered for sale to its former owner when it would be “impracticable” to do so. The reason given was that the company had been removed from the companies register.

Aztek was restored to the companies register in 2015 after the directors of the company discovered that the land had been declared surplus. The restoration of the company, in effect, brought it back to life as if it was never removed from the companies register.

The Court of Appeal relied on both the wording and purpose of section 40 of the PWA to decide that the chief executive of LINZ should have enquired with the shareholder of the company as to whether it was possible for the company to be restored to the companies register in order to receive an offer of the land. That enquiry should have been made between the decision that the land was surplus and the decision that a sale to the former owner was “impracticable”. In this case, those decisions were made at the same time.

The Court relied on a number of previous decisions about the rights of former owners under the PWA and concluded that the PWA is designed to ensure that, so far as practicable, land is returned to the persons from whom it was acquired as “that is the right thing to do”. The Court held that, in this case, it was both reasonable and practicable to advise the shareholder of the company of the possibility of receiving an offer if the company was restored to the companies register.

This was a case where the company was closely-held, and the company had been removed from the companies register less than two years before the land became surplus. The reasonable performance of the chief executive’s duties could have resulted in the company being restored to the register in order to receive an offer in the months following the November 2011 decision that the land was surplus.

Restoration to the register is a relatively straightforward process under sections 328 to 331 of the Companies Act 1993 where the relevant ground for removal did not exist (generally, that the company had ceased to carry on business) and a useful provision in a variety of scenarios, both inside and outside of a liquidation.

The PWA remains a complex piece of legislation, which is well overdue for reform, with the rights and obligations of landowners and governmental agencies becoming more and more governed by caselaw. In this particular case, it is not yet known if an appeal to the Supreme Court will be sought by the Crown.

A number of our lawyers regularly provide advice on the PWA and one of our senior consultants, John Greenwood, advised Aztek and its shareholder on this matter. If you would like further information about this or any other PWA matter, please contact one of our property lawyers. Our corporate team can also assist with restoration to the companies register or other company law matter.


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Covid-19 Recovery (Fast Track Consenting) Bill

Another tool in the Government’s armoury towards Covid-19 related economic recovery is a step closer this week with the introduction of the Covid-19 Recovery (Fast-track Consenting) Bill. Styled in part on the recovery legislation we saw after the Canterbury and Kaikōura Earthquakes, the legislation seeks to circumvent the Resource Management Act 1991 in an attempt to speed up the consenting of projects with a view to aiding employment and catalysing economic recovery...

Covid-19 Recovery (Fast Track Consenting) Bill

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Covid-19 Recovery (Fast Track Consenting) Bill

Covid-19 Recovery (Fast Track Consenting) Bill

Another tool in the Government’s armoury towards Covid-19 related economic recovery is a step closer this week with the introduction of the Covid-19 Recovery (Fast-track Consenting) Bill. Styled in part on the recovery legislation we saw after the Canterbury and Kaikōura Earthquakes, the legislation seeks to circumvent the Resource Management Act 1991 in an attempt to speed up the consenting of projects with a view to aiding employment and catalysing economic recovery.


For the 11 “listed projects” contained within the Bill itself, the pathway is relatively clear. These projects are already on the fast track and almost (we think!) assured of consent with the expert consenting panel apparently only having to satisfy itself that the grant of consent or designation is not inconsistent with any national policy statement (including a New Zealand coastal policy statement) or Treaty settlement legislation and then determining what conditions should attach. The expectation in the Bill appears to be that these projects will be consented in short order, subject to the relevant applicant completing the necessary applications. The Bill sets out some reasonably hefty requirements for those applications, but how that will translate into practice remains to be seen.
 
For roading and rail projects, KiwiRail and NZTA obtain some limited permitted works powers in respect of existing public infrastructure works (subject to specific performance standards included in the Bill), with local councils being given a monitoring role to ensure accountability. By way of an Order in Council on recommendation from the Minister for the Environment, Kāinga Ora, the Ministry of Housing and Urban Development and local authorities may also receive permitted works powers in limited circumstances.
 
For everyone else, a pathway exists to get on the fast track bandwagon. Provided certain criteria are met, any person can apply to the Minister for the Environment to have a project referred to the expert consenting panel. With a maximum 70 day decision-making timeframe for most projects, no notification requirements, potentially no hearing and no appeals (other than on points of law), it’s a handy process if you can get it. Although getting it may well be the trick! The Bill gives the Minister almost complete discretion as to whether to refer a project on to the consenting panel and this will assist to ward off successful judicial review (although may not stop it as a tactical stall).  
 
Again, however, the Bill provides for a detailed application and assessment of environmental effects to reach that determination, which will have implications for all applicants. While the Bill indicates that an application need only provide a “general level of detail”, working out what the Minister will actually need to see to be convinced of the merit of the application will be critical – particularly given the substantial number of applications that are anticipated and the requirement for the Minister to invite comment on the application from a range of other Ministers.
 
There is no doubt the legislation is laudable in its attempt to urgently consent projects that can deliver jobs and catalyse the economy. However, in our experience, “fast tracks” are not the panacea they initially appear to be. Our experience acting for the government recovery agencies under the Canterbury Earthquake Recovery Act 2011 and the Greater Christchurch Regeneration Act 2016 is that processes that require Ministerial decisions can be slowed by myriad factors including the wider political environment. Even under the current streamlined plan processes in the Resource Management Act 1991, the Ministerial decision to agree the “fast track” or otherwise has taken, on average, seven months over the six applications so far approved (before the actual process for council or judicial decision-making even starts). In a similar vein, it is our experience that the political goodwill expended on these processes can wane with time and particularly after the first judicial review (especially if the Minister is reprimanded by the Courts).
 
The legislation is well-constructed and could definitely be a game-changer for many projects, with a resultant stimulus to the economy. The question is whether it will be more successful than its predecessors in actually producing the promised time-savings. Navigating the necessary Ministerial approval processes will require considerable skill and strategic nous. Retaining advisors well-versed in these processes will be critical, particularly in the early stages where all potential applicants are endeavouring to work out what the legislation requires.
 
If you would like more information on whether your project might be assisted by this new process, please feel free to contact us. We expect demand for the Minister’s attention under this legislation to be high and providing a compelling case early will be a significant advantage.


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Electronic signatures – how and when can they be used?

With the increase in remote working as a result of the Covid-19 pandemic, our reliance on technology has necessarily increased, and this has included the signing of documents electronically. This article describes when electronic signatures can be used, and how enforceable they are...

Electronic signatures – how and when can they be used?

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Electronic signatures – how and when can they be used?

Electronic signatures – how and when can they be used?

With the increase in remote working as a result of the Covid-19 pandemic, our reliance on technology has necessarily increased, and this has included the signing of documents electronically. This article describes when electronic signatures can be used, and how enforceable they are.


Electronic signatures
The Contract and Commercial Law Act 2017 (Act) defines the term “electronic signature” in relation to information in electronic form, as “a method used to identify a person and to indicate that person’s approval of that information”.

This could include anything from the scanned version of a signature, the ticking of an “I accept” option or a signature formed by a finger on a tablet or smartphone.

The Act provides for statutory validation of an electronic signature, subject only to a few exceptions. The general rule is that, where any legislation requires dealings to take place on paper, that dealing is also permitted to take place electronically, provided the signature meets certain requirements, both parties agree and the dealings are not expressly excluded from the Act.

Signature requirements
A valid electronic signature can be broken down into the following three requirements:

  • the signature must be in electronic form;

  • the signature must be used to identify a person; and

  • the signature must be used to indicate that person’s approval of that information.

Any signature used to identify a person must be reliable. There is a presumption in section 228 of the Act that an electronic signature is reliable if:

  • it is linked to the signatory only and to no other person;

  • the means of creating it were under the control of the signatory only;

  • any alteration made after signing is detectable; and

  • its purpose is to provide assurance as to the integrity of the information to which it relates.

Section 226(1)(a) of the Act requires that a signature must “adequately [indicate] the signatory’s approval of the information to which the signature relates. The ADLS signing system, for example, inserts a sentence after the signature stating that the person intends to be bound by the document they are signing.

Types of documents that can be electronically signed
The Act does not list the documents permitted to be electronically signed. Instead, it lists documents that may not be (see below).

In practice, the following documents can be electronically signed:

  • commercial agreements and deeds;

  • agreements for the sale and purchase of land or interests in land;

  • leases;

  • director, shareholder and trustee resolutions;

  • Authority and Instruction forms (A & I Forms) authorising a lawyer or conveyancing practitioner to sign a land transaction document electronically, although with some limitations as set out below; and

  • information that is required to be given in writing in person, but only if the person receiving the electronic signature consents to it.

Types of documents you cannot electronically sign
Schedule 5 of the Act provides examples where an electronic signature cannot be used, including:

  • election and referendum documents;

  • certain notices given under citizenship laws;

  • wills;

  • affidavits;

  • statutory declarations;

  • documents that are given on oath or affirmation;

  • powers of attorney and enduring powers of attorney;

  • warrants authorising entry to premises; and

  • information that is required to be given in writing in person.

A & I Forms
A & I Forms are the method used by clients to instruct lawyers and conveyancing practitioners to certify and sign land transaction documents. Lawyers and conveyancing practitioners rely on properly signed and witnessed A & I Forms to electronically sign land transaction documents in a system known as Landonline.

The reliance on A & I Forms is regulated by Land Information New Zealand (LINZ) and is subject to audit. LINZ issues guidelines setting out requirements for the use of A & I Forms.

For a lawyer or conveyancing practitioner to rely on an electronically-signed A & I Form, the lawyer or conveyancing practitioner must be certain that:

  • the means of creating the electronic signature is linked to the signatory and to no other person;

  • the means of creating the electronic signature was under the control of the signatory and of no other person;

  • any alteration to the electronic signature made after the time of signing is detectable; and

  • where the purpose of the legal requirement for a signature is to provide assurance as to the integrity of the information to which it relates, any alteration made to that information after the time of signing is detectable.

Recent guidance from LINZ also requires that the electronic system provide the lawyer or conveyancing practitioner with:

  • audit records that can be produced if the transaction is audited; and

  • assurance – i.e. the system provides sufficient information and safeguards to ensure that lawyers and conveyancing practitioners can make certifications on the basis of the information supplied to them.

As A & I Forms are used to enable changes to the land transfer register, it is crucial that lawyers and conveyancing practitioners are certain that all of the above requirements are met. We expect that the above requirements are likely only complied with if the lawyer or conveyancing practitioner sets up the electronic signing process using a program known to the lawyer or conveyancing practitioner or otherwise obtains comfort about the system used by their client.

In addition, the electronic signature must be witnessed by a “trusted professional” (except for some governmental or publicly-listed entities, where no witness is required). This normally requires that a lawyer or similar professional be present when the signature is applied (through an electronic signing program or with ink) to the A & I Form. Remote witnessing by audio-visual technology is available, but that witness must then be the lawyer or conveyancing practitioner who will be relying on the A & I Form to sign the land transaction document.


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Overseas Investment (Urgent Measures) Amendment Bill

Amongst a menu of urgent changes designed to combat the effect of Covid-19, on 14 May 2020 the Government introduced the Overseas Investment (Urgent Measures) Amendment Bill (Urgent Measures Bill) into Parliament. This Bill proposes further changes to the Overseas Investment Act 2005 (Act) with the introduction of a temporary notification regime, and fast tracks the national interest test. ..

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Overseas Investment (Urgent Measures) Amendment Bill

Amongst a menu of urgent changes designed to combat the effect of Covid-19, on 14 May 2020 the Government introduced the Overseas Investment (Urgent Measures) Amendment Bill (Urgent Measures Bill) into Parliament. This Bill proposes further changes to the Overseas Investment Act 2005 (Act) with the introduction of a temporary notification regime, and fast tracks the national interest test.


 The Urgent Measures Bill introduces a number of changes which will reduce the regulatory burden on investors and will also bring in those changes previously detailed in the Overseas Investment Amendment Bill (No 2) that the Government considers are urgently required. These are intended to take effect once the Urgent Measures Bill is in force. The remaining provisions of the Overseas Investment Amendment Bill (No 2) that have not been fast tracked under the Urgent Measures Bill will move into a new bill, the Overseas Investment Amendment Bill (No 3), which will proceed through the usual legislative process, and is expected to pass through Parliament in the next 12 months.
 
The Covid-19 pandemic and the economic downturn have created new foreign investment risk, and the Urgent Measures Bill is intended to stop vulnerable New Zealand assets being subject to foreign takeover during the economic fallout from Covid-19. Speaking of the Urgent Measures Bill, Associate Finance Minister David Parker has said:

“Hypothetically, with international tourism at a standstill the value of a significant tourism company may have plummeted and could be low or near zero. That value would not reflect the importance of the business, so interim controls are needed to protect our national interest.”

The Urgent Measures Bill had its first reading on 14 May, and it is intended to be passed quickly with a shortened Select Committee process. It is anticipated the Urgent Measures Bill will come into force in the middle of June.
 
The key changes under the Urgent Measures Bill are:

  • The introduction of a temporary emergency notification requirement for key control transactions that would not ordinarily have been covered by the Act.

  • The introduction of the national interest test in respect of strategically important businesses.

  • Once the temporary emergency notification requirement is no longer required, the introduction of a right for the Government to exercise a call-in power in respect of both investments in businesses not ordinarily screened by the Act but which may pose significant national security and public order risks, and investments in businesses that hold or generate certain types of sensitive data. This right will also apply to the majority of investments captured by the national interest test.

  • Simplification of the overseas investment regime by reducing the number of applications that require screening, bringing forward certain measures set out in the Overseas Investment Amendment Bill (No 2).

These changes are discussed in detail below.
 
Temporary Notification Requirement
 
The temporary notification regime requires certain transactions to be notified to the Government, even if these transactions would not ordinarily require consent under the Act. Under the regime, overseas investors will be required to notify the Government before they proceed with an investment in a New Zealand business that involves:

  • the acquisition of a more than 25% interest in a business;

  • an increase an existing interest in that business to, or beyond, certain thresholds (being 50%, 75% or 100%), or the acquisition of more than 25% of the business’ assets (by value). This requirement will apply regardless of the dollar value of the investment; or

  • the acquisition of property (including goodwill and other intangible assets) in New Zealand used in carrying on business in New Zealand (whether by one transaction or a series of related or linked transactions) of any value that effectively amounts to a change in control of the business.

Once notified, the Minister will then consider whether the investment is contrary to the national interest. The Minister may impose conditions on, or prohibit, certain transactions. It is anticipated that the majority of transactions will proceed without any Government intervention or any conditions imposed.
 
The Urgent Measures Bill requires the notification to be provided prior to transaction closing, in writing. The exact details of the requirement are yet to be prescribed in regulations, but it is anticipated that the investor will be required to provide certain details on the transaction to the Overseas Investment Office, such as  the identity, ownership and control details of the investor, any links to foreign governments, broad transaction details including the nature of the business or property to be acquired and the commercial rationale for the purchase (including as to pricing and valuation). A notification form will apparently be available on the Overseas Investment Office’s website.
 
The Government intends that investors will be notified within 10 days whether a transaction could be contrary to New Zealand’s national interest and subject to a further detailed review, which is to be processed within 40 days and may be extended by up to 30 days. The exact details and timeframes will be set out in the regulations. There will be no fee for submitting a notification.
 
Failure to comply with the notification requirements also means that the Government could later unwind the transaction if it fails the national interest test.
 
Even if not notified formally, the Minister may exercise his or her own discretion and determine a transaction to be contrary to the national interest, with the same potential unwind consequences.
 
The temporary notification requirement will be reviewed every 90 days and will only remain in place while the Covid-19 pandemic and its associated economic impacts continue to have a “significant effect in New Zealand” – a matter open to interpretation at the margins but which potentially could be for quite a long time.
 
Acceleration of the National Interest Test
 
The national interest test will allow the Minister of Finance to deny consent to any investment ordinarily screened under the Act that is considered to be contrary to New Zealand’s national interest (including security, economic and other interests). This power has been modelled on the Australian regime, but with the addition of an express discretionary Ministerial extension of the concept. This power and discretion cannot be delegated to the OIO.
 
Transactions of national interest are broadly defined as transactions already requiring consent under the Act which result in:

  • an investment by a non-New Zealand government investor;

  • an investment in a strategically important business (for example, military or dual use technology, security and intelligence, electricity and water, telecommunications, financial market infrastructure, significant airports and ports, or any key supplier to these, all as detailed in regulations yet to be drafted); or

  • any other investment that the Minister considers could be contrary to New Zealand’s national interest, provided that the Minister has notified the applicant that the transaction is being considered as such.

 Please refer to our previous article here for further details of the national interest test.
 
“Call-In” Powers
 
Once the temporary emergency notification requirement is removed, the Government will have replacement “call-in” powers to review certain investments in strategically important businesses which would not ordinarily be captured by the Act. This power would allow the Government to call in certain transactions, place conditions on or prohibit certain transactions from proceeding where they are perceived to pose a risk of harm to New Zealand’s national security or public order. The call-in power would apply to those types of business captured under the national interest test (excluding large irrigation schemes), and will extend to investments in businesses that hold or generate certain types of sensitive data (for example health or financial data). 
 
Please refer to our previous article for further details of the “call-in powers” (see above link).
 
Changes to simplify the Overseas Investment Regime
 
Certain changes originally introduced under the Overseas Investment Amendment Bill (No 2) are being fast tracked under the Urgent Measures Bill with the purpose of reducing the regulatory burden of the Act. This is in part due to the Covid-19 pandemic, as well as the expected time period for the passage of the Overseas Investment Amendment Bill (No 3) through Parliament.
 
The Urgent Measures Bill proposes to make it simpler to make productive investments in New Zealand by:

  • introducing a statutory standing consent in respect of certain New Zealand listed issuers and managed investment schemes;

  • reducing the number of fundamentally New Zealand entities that must obtain consent under the Act;

  • narrowing the definition of overseas person for all other non-natural persons such that a more than 25% interest must be held by overseas persons before the entity can be deemed to be an overseas person;

  • introducing streamlined consent criteria for investments in less sensitive New Zealand land that is only screened because it adjoins land that is sensitive in its own right;

  • simplifying the investor test by undertaking more targeted assessments of an investor’s character; and

  • reducing the number of small transactions that do not change control of sensitive assets that must get consent.

 Details of these are covered in our earlier article (see above link).
 
If you would like more information on the Urgent Measures Bill or application of the Overseas Investment Act generally, please contact us. We will provide further details of interest on the Urgent Measures Bill and regulations as they become available. 


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Some Significant Changes to New Zealand’s Overseas Investment Regime

The Overseas Investment Amendment Bill (No. 2) (Bill) was introduced to Parliament on 19 March 2020, with the intention to carry out further reforms to the overseas investment regime in New Zealand, and implement changes known as the Phase 2 reforms. ..

Some Significant Changes to New Zealand’s Overseas Investment Regime

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Some Significant Changes to New Zealand’s Overseas Investment Regime

Some Significant Changes to New Zealand’s Overseas Investment Regime

The Overseas Investment Amendment Bill (No. 2) (Bill) was introduced to Parliament on 19 March 2020, with the intention to carry out further reforms to the overseas investment regime in New Zealand, and implement changes known as the Phase 2 reforms.


The Phase 1 reforms, which placed restrictions on the sale of residential land to overseas persons and streamlined the consent process for forestry investment, were implemented in the 2018 changes to the Overseas Investment Act 2005 (Act).
 
The Bill proposes to introduce a number of changes to the Act to enable a more streamlined approach to overseas investment.  It does this by ensuring that the risks posed by foreign investments can be managed effectively, while better supporting productive overseas investment through easing of the regulatory burden of the screening process.
 
We summarise below some of the key amendments:
 
1.       National Interest Test

The introduction of a national interest test will allow the Minister responsible for the Act, the Minister of Finance, to deny consent to any investment ordinarily screened under the Act that is considered to be contrary to New Zealand’s national interest (including security, economic and other interests). This is similar to the Australian regime but gives the Minister much broader discretion to consider what is in the national interest in each case. By leaving some significant detail to determination by regulations, there is scope here for this to be influenced by government policy of the day rather than be limited to traditional “national interest” (ie. security or intelligence) concerns.

Transactions of national interest are broadly defined as transactions already requiring consent under the Act which result in:
 

  • an investment by a non-New Zealand government investor;

  • an investment in a strategically important business; or 

  • any other investment that the Minister considers could be contrary to New Zealand’s national interest, provided that the Minister has notified the applicant that the transaction is being considered as such.


Categories of strategically important businesses that the national interest test will apply to are, subject to the detail of regulations yet to be developed:
 

  • businesses that develop, produce or maintain military or dual-use technology;

  • critical direct suppliers to intelligence or security agencies;

  • telecommunications infrastructure or service providers;

  • businesses that generate or distribute electricity;

  • businesses involved in designated ports and airports;

  • systematically important financial institutions or financial market infrastructure;

  • media business that have an impact on New Zealand’s media plurality; and

  • large irrigation schemes.


On 13 May 2020, Associate Finance Minister David Parker announced that the introduction of the national interest test will be accelerated, so as to have it in place quickly to help deal with fall-out from the Covid-19 pandemic.
 
In addition, the national interest test will temporarily apply to any foreign investment, regardless of its nature or value, that results in a 25% ownership of a New Zealand business. It will also apply to increases of an existing interest to or beyond 50%, 75% or 100% in a New Zealand business. The Associate  Minister has said that the aim here is to minimise the possibility that cornerstone businesses in our productive economy are sold in a way contrary to our national interest while the pandemic is causing the value of many businesses to fall.
 
In practice, this is to operate as a simple notification requirement and the process is to be quick to ensure investment is not unduly delayed.
 
These temporary powers will be reviewed every 90 days, and will remain in place only as it is necessary to protect essential New Zealand businesses from the effects of the Covid-19 pandemic. The national interest test will remain (with a minimum threshold of $100 million) once the temporary measures end.
 
The Government aims to have the temporary measures in place by mid-June.
 
2.       Call-in Power
 
The Government has proposed a “call-in” power which allows for review of certain investments which would not ordinarily be captured by the Act. This power would allow the Government to call in certain transactions, place conditions on or prohibit certain transactions from proceeding where they pose a risk of harm to New Zealand’s national security or public order. Notification to Land Information New Zealand of these transactions before they are given effect to may be either mandatory or voluntary, depending on the category of the business involved.
 
The call-in power would apply to those types of business captured under the national interest test (excluding large irrigation schemes), and will extend to investments in business that hold or generate certain types of sensitive data (for example health or financial data).  It is expected that this power would be used only in rare circumstances where necessary to protect New Zealand’s interests.
 
3.       Lower Risk Transactions
 
The Bill proposes that certain lower risk transactions will no longer require consent under the Act. These types of transactions include:
 

  • Investments in land that are only screened because the land adjoins land that is sensitive in its own right (sensitive adjoining land). The adjoining land criteria has been narrowed, with the aim of reducing the number of transactions requiring consent under the Act. This is a significant change, to be welcomed, as a number of land transactions have to date been covered only because of the nature of adjoining land; 

  • Commercial leases or other interests in land of less than 10 years (whether this threshold is reached through a single interest or cumulative interests), being an increase from 3 years in the current legislation – again another significant easing although still not long enough to exclude most major commercial or industrial leasing;

  • Investments involving fundamentally New Zealand entities (refer below); and 

  • Small transactions which do not grant an overseas investor any control of sensitive assets.

 
4.         Narrowing of the meaning of “overseas person”
 
One important proposed change is to the definition of an “overseas person” as applied to a corporate entity. This is expected to reduce the number of corporate entities requiring consent under the Act.
 
Currently, entities that are 25% or more overseas owned will be an “overseas person” under the Act. The changes proposed mean that a corporate entity will be an “overseas person” only if it is more than 25% overseas owned. This makes sense, 25% being one of several common lower control thresholds for a minority investment that do not give any real control usually, save sometimes on very important decisions. More than 25%, in contrast, denotes the power to block a special resolution.
 
Perhaps more significantly, a New Zealand listed company will only be considered an “overseas person” if more than 50% of its shares are owned by an overseas person or two or more overseas persons cumulatively (the ownership test), or where overseas persons who hold 10% or more shares control the composition of 50% or more of the company’s governing body, or exercise control of more than 25% of the voting power at meetings of the company (the control test).
 
5.       Farm Land Advertising
 
Farm land in New Zealand will be subject to more thorough advertising requirements to allow New Zealanders more of a chance to purchase the land on the open market before it is sold to overseas investors. This includes increasing the minimum timeframe in which advertising must take place, ensuring that the advertising takes place prior to the parties entering a sale and purchase agreement and allowing alternative forms of advertising where appropriate.
 
6.         Streamlined Application Process
 
The Bill proposes to simplify the application process itself, by:
 

  • Completing more targeted assessments of an investor’s character and capability in the good character investor test, by only considering serious proven matters, allegations of serious matters where proceedings have begun, and any enforceable undertakings entered into by the investor.  

  • Importantly, the Bill no longer requires investors to carry out a full screening process for subsequent investment applications if they have been screened and approved in a prior investment. The investor simply has to prove that there has been no change to the investor test factors, or that any changes do not make the investor unsuitable to own New Zealand land.

  • Simplifying the ”benefit to New Zealand” test in some very practically significant ways:
     

    • Changing the counterfactual assessment requirement so that a “before and after” the investment assessment is completed, rather than “with and without” (it seems this is effectively a quiet reversal of the hugely problematic Crafar Farms ruling, that resulted in a significant degree of crystal ball gazing about what other potential investors would have done to add benefits); 

    • Introducing a proportionate approach to the test, taking into account the sensitivity of the land and the nature of the overseas investment – a very commonsense amendment;

    • Removing the requirement for ”substantial and identifiable” benefit for non-urban land greater than 5 hectares; 

    • Introducing a test for determining whether there will be a negative impact on water quality or sustainability where the investment involves extraction of water for bottling or bulk consumption; and

    • If the acquisition involves more than 5 hectares of farm land, there is a higher threshold for demonstrating the benefit to New Zealand as a reflection of its significant economic and cultural importance.
       

  • Following criticism of the lack of formal time frames, the Bill introduces statutory time frames for decisions to be made by the regulator. These will be set out in Regulations. Applicants will not be entitled to any relief if the timeframes are not met, and the timeframes do not create any legally enforceable right against the relevant Minister or regulator. 


7.       Increased Cost of Non-Compliance
 
The penalties for non-compliance with the Act have been significantly increased, raising the cap from $300,000 to $500,000 for individuals and from $300,000 to $10 million for all other applicants. The Overseas Investment Office will also be able to enforce undertakings given by overseas investors in Court, and may seek injunctive relief from the High Court in relation to steps to be taken (or not taken) by such investors.
 
The Government had planned to pass the Phase 2 reforms of the Act prior to the general election in September 2020, but the timeline for the Bill and its passage to enactment are now unclear due to the Covid-19 situation.  We will await further announcements on this Bill.
 
These are fairly significant amendments to the regime and it is surprising how quietly they have been slipped into Parliament and how little commentary they have attracted. Overall, though, they are to be welcomed.

Alternative Monetary Threshold for Australian Investors
 
In addition to the proposed changes to the Act, on 15 April 2020 the alternative monetary thresholds in respect of overseas investments in significant business assets by Australian investors were announced for the period 1 January 2020 – 31 December 2020.  These thresholds are:
 

  • $536 million in respect of Australian non-government investors; and

  • $112 million in respect of Australian government investors.


These thresholds are adjusted each year in accordance with the formula set out in the Overseas Investment Regulations 2005, and are relevant in the application of section 13 of the Act.
 
Please contact us if you would like further information on the changes proposed in the Bill, the recent announcement regarding the alternative monetary thresholds in respect of Australian investors, or the temporary Covid-19 measures.


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Housing, Active Transport and Environmental Enhancement to benefit from Fast Track RMA Processes

The Government has announced that a central element of its response to COVID-19 will involve a fast-track pathway through RMA processes for eligible projects. ..

News & Insights

Housing, Active Transport and Environmental Enhancement to benefit from Fast Track RMA Processes

The Government has announced that a central element of its response to COVID-19 will involve a fast-track pathway through RMA processes for eligible projects.


Although the Bill has not yet been released, the Minister for the Environment has indicated that the fast track process will apply to both resource consents and designations and will allow those projects that meet the criteria to be determined by an Expert Consenting Panel rather than progressing through the usual RMA processes. The Expert Consenting Panel will be chaired by a current or retired Environment Court Judge or senior lawyer and will also contain a person nominated by the relevant councils and a person nominated by the relevant iwi.
 
Decisions made by the Expert Consenting Panel will be issued within 25 working days after receiving comments on an application (with some large scale projects the timeframes will increase to 50 working days). Treaty of Waitangi settlements will be upheld, as will the sustainable management purpose of the RMA and existing RMA national direction. According to Minister Parker, “once a project is referred to the Panel there is a high level of certainty the resource consent will be granted”.  
 
Appeal rights will be limited to points of law and/or judicial review in the High Court, with one further right of appeal to the Court of Appeal.
 
Minister Parker has indicated that the types of projects that could benefit from quicker consenting include “roading, walking and cycling, rail, housing, sediment removal from silted rivers and estuaries, new wetland construction, flood management works, and projects to prevent landfill erosion”. 
 
The changes to RMA process would be temporary, lasting approximately 2 years, and the Government aims to pass legislation as early as June.
 
In terms of cross-party support for the fast-tracked process, we understand that the Green Party holds concerns about how iwi and environmental activists will be able to participate and have therefore indicated they will only support the Bill for its first reading before reassessing having reviewed public submissions. National have indicated they will likely consider the changes “favourably” once details are available, on the basis the proposal is a confirmation that the RMA is not “fit for purpose”. NZ First and ACT also appear supportive.
 
The Environmental Defence Society has likewise signalled hesitant support for the proposal given its focus on environmental enhancement, noting “Overall, it looks like the legislation will avoid sacrificing environmental standards and has focused mostly on speeding up decision-making. Given the exigencies of this C19 world, the outline of the proposed bill looks like an appropriate response”.
 
The fast-tracked RMA process has the potential to see many projects get underway earlier than could have been achieved under “business as usual” RMA processes. We consider that an important consideration of in the drafting of fast-track legislation should be the lessons learnt in the Christchurch and Kaikoura contexts, where fast-track processes have been utilised (and are still able to be utilised) with success. We have considered the Christchurch and Kaikoura experience here.
 
We look forward to updating you with further details when the Bill is introduced.


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Reintroduction of depreciation deductions on commercial and industrial buildings

On 17 March 2020, the Government released an economic response package with the aim of assisting businesses following the Covid-19 outbreak. It was initially costed at $12.1 billion, which is equivalent to around 4% of New Zealand’s annual GDP. The package has since been expanded to ensure it keeps up with the evolving impact the virus is having on the economy...

News & Insights

Reintroduction of depreciation deductions on commercial and industrial buildings

On 17 March 2020, the Government released an economic response package with the aim of assisting businesses following the Covid-19 outbreak. It was initially costed at $12.1 billion, which is equivalent to around 4% of New Zealand’s annual GDP. The package has since been expanded to ensure it keeps up with the evolving impact the virus is having on the economy.


Of the numerous support measures, $2.1 billion is being allocated towards reinstating depreciation on commercial and industrial buildings, including hotels and motels, but excluding residential properties.

Before 2010, owners of residential, commercial and industrial property in New Zealand were able to claim a tax deduction for building depreciation. This was an important feature of property investment, as it enabled the investor to claim an annual expense reflecting the assumed deterioration of the building, thereby spreading the cost of buying and improving a building over its useful life.

Tax depreciation for buildings was removed in 2010 in conjunction with a number of other tax changes such as increasing the rate of GST and lowering the corporate tax rate. This was on the basis that (amongst other things) Treasury’s analysis of QV data over the preceding 15 year period indicated that, on average, residential buildings in New Zealand, and arguably also commercial buildings, did not depreciate.

In 2018, the Tax Working Group observed the limitations of Treasury’s 2010 analysis and concluded that:

  • buildings do in fact depreciate and the international evidence is especially strong for industrial and commercial buildings; 

  • New Zealand is a clear outlier in the OECD in not allowing any depreciation deductions for commercial or industrial buildings, resulting in an effective marginal tax rate for ownership of these assets which is higher than in every other OECD country; and 

  • tax depreciation for commercial, industrial and multi-unit residential buildings should be reinstated at a 2% straight-line or 3% diminishing value rate.

The Government has now adopted this recommendation in respect of commercial and industrial buildings and, from 1 April 2020, these buildings are once again able to be depreciated, although at lower rates of 1.5% straight-line or 2% diminishing value. The capital cost of seismic strengthening is now depreciable – a matter which has been the subject of much debate over the last decade. These depreciation measures are being announced as permanent changes.

The depreciation deductions will assist hotel and motel owners impacted by the pandemic and building owners affected by reduced rental income. The intention is to encourage investment in new and existing buildings and improve business confidence. While this might be difficult to achieve in the short term, those with a longer investment horizon should benefit from the return to depreciation allowances which make this asset class a more tax efficient investment than many others.

On 15 April 2020, the Government announced further tax changes which will apply to small to medium enterprises (SMEs) only. These include:

  • a loss carry-back scheme which allows SMEs which experience losses in either the 2020 or 2021 tax year to carry the loss back and offset against profits in the preceding tax year (estimated to cost $3.1 billion over the next two years); and

  • relaxing the tax loss continuity rules so that SMEs which experience a change in ownership of greater than 51% do not have to forgo their tax losses, as previously required, and can use these to offset profits in later years (estimated to save SMEs $60 million per year). 


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COVID19 – Commercial Leasing at Alert Level 3

On Tuesday 28 April 2020, New Zealand moved to COVID-19 Alert Level 3. What does this mean for commercial leases?..

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COVID19 – Commercial Leasing at Alert Level 3

On Tuesday 28 April 2020, New Zealand moved to COVID-19 Alert Level 3. What does this mean for commercial leases?


The Government has issued the Health Act (Covid-19 Alert Level 3) Order 2020 (Government Order), which sets out the requirements for businesses operating under Alert Level 3. The restrictions in the Government Order are non-exhaustive and should be considered in conjunction with other Government directives and guidance for specific industries.

Operating from your premises

Depending on the nature of a business, the Government Order prescribes the circumstances in which the business may open from its premises:

Type of Business

Infection Control Measures Required

  • Government agencies providing essential services (eg. immigration, corrections and emergency services)

  • Essential healthcare services

  • Physical distancing

  • Early childhood centres and schools

  • Physical distancing

  • Keep children, students and teachers in groups that are appropriately sized (to the extent practicable)

  • For schools, only open for students up to year 10

  • Supermarkets and dairies

  • Petrol stations

  • Pharmacies

  • Accommodation services

  • Physical distancing, with an increased distance of 2 metres between employees and customers

  • Prevent food or drink being served from the premises for consumption on the premises (except for accommodation services)

  • Venue businesses

  • Physical distancing, with an increased distance of 2 metres between all people

  • Ensure the venue is only used for controlled gatherings (ie. a wedding, tangihanga or funeral, with no more than 10 people present, and no food or drink served)

  • Public transport (except small passenger service vehicles)

  • Physical distancing, with an increased distance of 2 metres between all people

  • All other business

  • Physical distancing

  • Support contact tracing for any person entering the premises

  • Ensure no clients or customers enter the premises (other than to collect goods but without entering a building)

  • Ensure no close personal contact with customers or clients


Physical distancing measures are set out in the Government Order by reference to the type of business. For most businesses, this means having systems and processes in place which:
 

  • ensure people remain 1 metre away from other people or, if closer, are there for less than 15 minutes, so far as is reasonably practicable taking into account the nature of the business; and

  • mitigate the risks that arise to the extent that the above distance requirements are not fully maintained.

Unless a business implements the required infection control measures, it must remain closed. The Government has also asked that everyone that can work from home should do so, although this is not included in the Government Order.

Abatement of rent

A number of clients are now enquiring as to how the Alert Level 3 restrictions impact on any rent abatement provisions in commercial leases. Where a lease contains the commonly-used ADLS “no access in emergency” provision (or similar), for the clause to apply the emergency must “prevent the tenant from accessing the premises to fully conduct the tenant’s business”.

As at Alert Level 4, each lease must be assessed on a case by case basis.

Under the Government Order, most premises may only open if the necessary infection control measures are implemented. It is worth noting that the position on the Government’s https://covid19.govt.nz/ website is more restrictive than the Government Order – for example, on the website people are encouraged to work from home if they can. From a legal perspective, the Government Order is the source of legal restrictions, not the website, but the wider directives and guidance issued by the Government will still be relevant in assessing the restrictions applicable to each particular premises.

A tenant should provide its landlord with details of the extent to which its ability to operate fully from the premises is prevented due to the Government restrictions as a whole. Under leases containing a rent abatement provision such as clause 27.5 in the ADLS Sixth Edition, a fair proportion of rent and outgoings should then be abated based on this information. Regarding the main categories of commercial tenants:
 

  • Many hospitality and retail tenants are now operating from their premises in a limited capacity, allowing for contactless pick up of online orders, for example. While this may allow part of the premises to be utilised for the tenant’s business – such as a restaurant or café’s kitchen, or a retail tenant’s storage space – this is not a full operation of the tenant’s business or the premises. While the proportion of rent and outgoings that cease to be payable will be less than that at Alert Level 4, some abatement will likely still apply.

  • Office tenants are now able to access their premises, but many cannot operate fully from the premises, for example they cannot admit customers or clients and must maintain physical distancing. Others will be able to fully operate, for example if they seldom admit customers or clients and have workstations already sufficiently separated. Depending on the level to which a tenant is able to operate from the premises, a fair proportion of rent and outgoings may still cease to be payable under a no access provision.

  • Many warehousing and industrial tenants are now operating, although this may be at a limited capacity. Again, each tenancy needs to be assessed on a case by case basis as to the extent that the tenant is able to operate from the premises.

The no access provisions are based on the ability for a tenant to access the premises to operate its business, not whether or not it chooses to implement the necessary infection control measures and begin to operate. Any abatement should therefore be based on the legal restrictions for each premises, together with Government directives and guidance, and not the discretionary actions of the tenant.

Given the rapidly changing situation and uncertainty around future alert levels, it is recommended that landlords and tenants continue to work together to agree on a position for Alert Level 3 that is satisfactory to both parties. This position will need to be reconsidered at Alert Level 2 once specific restrictions for that alert level are announced. It is anticipated that the majority of premises will be able to reopen at Alert Level 2, potentially with fewer associated restrictions, and therefore the no access provisions in leases will likely have a diminished impact and, in some cases, may cease to apply.

If you have any questions about how the Government Order affects your lease, please feel free to contact any of our commercial property lawyers.


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