First Covid-19 rent reduction request received

[Perry]

Thanks for your suggestion Keys  but we are cognisant that these are not times to be heavy handed. Our government needs to come to the party with direction.

Optimist. Socialist Cindy has little-to-no interest in your woes.

[ronniegal]

Optimist. Socialist Cindy has little-to-no interest in your woes.

So true. But then I guess I'm not being compassionate enough. My bad.

[Perry]

Fool! Only ze Communistic State can be compassionate.

[Keithw]

How about turning it around and negotiating a percentage of their gross turnover once they are back operating again.
Ask to see their accounts. they will try to claim commercial in confidence, but if you run a company that supplied to Govt or Defence it is very common to have to show costings/margins etc.
Try to ascertain what percentage of their previous turnover is rent and outgoings, ask them directly if they refuse to provide accounts.
Negotiate for ongoing rent to maintain that percentage plus an amount that amortises the lost rent over say a year. Same as if a residential tenant got behind on rent and had to make it up over future payments.

This process means you are taking on some of their business risk (low sales may mean low rent), but it is at least moving forward.
Waiting for the idiots currently attempting to run the country to come up with any direction at all, let alone a positive one, is just a waste of time.

[Bluecoat]

Seems all the protection is for tenants, no protection if tenants decides to move on after lockdown.

When does the landlord have a say on the tenants who gave notice prior to lockdown, didn't move during lockdown and now can move out anytime they feel like with no notice at all ?

https://www.tenancy.govt.nz/.../ending-a-tenancy-during.../

[ronniegal]

How about turning it around and negotiating a percentage of their gross turnover once they are back operating again.
Ask to see their accounts. they will try to claim commercial in confidence, but if you run a company that supplied to Govt or Defence it is very common to have to show costings/margins etc.
Try to ascertain what percentage of their previous turnover is rent and outgoings, ask them directly if they refuse to provide accounts.
Negotiate for ongoing rent to maintain that percentage plus an amount that amortises the lost rent over say a year. Same as if a residential tenant got behind on rent and had to make it up over future payments.

This process means you are taking on some of their business risk (low sales may mean low rent), but it is at least moving forward.
Waiting for the idiots currently attempting to run the country to come up with any direction at all, let alone a positive one, is just a waste of time.

Thanks Keith. These guys have over 100 stores around the world charging a lot for their product. Peeved off that little old mum and dad investors have to defend our case in this way. We have decided to dig our heels in with our offer and see where we go. Will keep you posted.

[Malcolm1]

Interested in your thread about tenants asking for rent reduction...if they have a 2012 ADLS lease does clause 27.5 come into effect due to "No Access"....?

[Nick G]

I'm giving one group 30% off for a spell. They were really struggling, I can afford it. No drama.

[Wayne]

Interested in your thread about tenants asking for rent reduction...if they have a 2012 ADLS lease does clause 27.5 come into effect due to "No Access"....?

Yes it does - the question is then what is 'fair'?
What do you do if the tenant reduces the rent (or stops it) off their own bat and won't talk about it?

[Malcolm1]

Hi Wayne,reading some comments from Law firms, they are advising tenants to pay full rent and communicate " without prejudice" about clause 27.5 & 27.6 if they have this type of lease. The clause has a section in there that requires the tenant to pay a "fair & reasonable proportion"of the rent & Opex? But then in the next paragraph they ask "what is fair & reasonable"? Plenty of grey areas around this clause,but communication is the key if possible and also the situation you are presently in vs the tenants ie; are they new tenants, do they have a 4-6 year lease and can you afford not to have them when we drop to level 2/1?
Google clause 27.5 ADLS 2012 lease, if that is what your tenants presently have, some interesting commentary from the so called top law firms in NZ,good luck...!!

[Wayne]

Hi Wayne,reading some comments from Law firms, they are advising tenants to pay full rent and communicate " without prejudice" about clause 27.5 & 27.6 if they have this type of lease. The clause has a section in there that requires the tenant to pay a "fair & reasonable proportion"of the rent & Opex? But then in the next paragraph they ask "what is fair & reasonable"? Plenty of grey areas around this clause,but communication is the key if possible and also the situation you are presently in vs the tenants ie; are they new tenants, do they have a 4-6 year lease and can you afford not to have them when we drop to level 2/1?
Google clause 27.5 ADLS 2012 lease, if that is what your tenants presently have, some interesting commentary from the so called top law firms in NZ,good luck...!!

I have looked into it.
I have talked to my commercial tenant.
We have come to a mutually agreeable solution.
Luck not needed for me thanks.

[Bradley]

We've had another request to extend the lower lease rate we agreed to during the pandemic. I'm of two minds about this, given that:
a) None of their suppliers have offered special terms or pricing,
b) We waived a lease cost review for the year,
c) They have received 6 months of reduced lease (initial term + lockdown period) within a couple of years,
d) Tenants have new finance options available to them, that they did not have before.

Thoughts most appreciated. Including telling me if I'm being unreasonable!

[mrsaneperson]

We've had another request to extend the lower lease rate we agreed to during the pandemic. I'm of two minds about this, given that:
a) None of their suppliers have offered special terms or pricing,
b) We waived a lease cost review for the year,
c) They have received 6 months of reduced lease (initial term + lockdown period) within a couple of years,
d) Tenants have new finance options available to them, that they did not have before.

Thoughts most appreciated. Including telling me if I'm being unreasonable!

Add to that list that they most probably received a substantial subsidy from the government to help during this crisis . That subsidy payout is supposed to go towards their costs to run the business which includes rents for both commercial and residential tenancies . This subsidy applies just as much to help those in residential tenancies especially so to those tenants that are self employed.

[Bradley]

Add to that list that they most probably received a substantial subsidy from the government to help during this crisis . That subsidy payout is supposed to go towards their costs to run the business which includes rents for both commercial and residential tenancies . This subsidy applies just as much to help those in residential tenancies especially so to those tenants that are self employed.

Yes, good point.

Given we have cut the lease in half for 6 months, I think we'll decline on offering them any further reductions. The lease is actually one of the smaller of their monthly costs, with the lease of equipment being one of the highest aside from the usual wages, consumables etc.

[mrsaneperson]

Yes, good point.

Given we have cut the lease in half for 6 months, I think we'll decline on offering them any further reductions. The lease is actually one of the smaller of their monthly costs, with the lease of equipment being one of the highest aside from the usual wages, consumables etc.

If you search the name of their business in the covid 19 subsidy search facility you can find out exactly what they received from the government .