With nowhere else to turn, a small business owner issues a plea to the prime minister to level the playing field between tenant and landlord.
Dear Ms Ardern,
First of all, I would like to congratulate you on your re-election, and your second term in government. I hope it will be a successful three years that allows you to create meaningful change and address the critical issues in our society.
I am the owner of a (now shuttered) small business in Auckland’s CBD. For legal reasons, I have to remain anonymous. I am writing to you now to ask for help. I am desperate, and have nowhere left to turn.
Covid-19 and two lockdowns this year have stripped me of my main livelihood and my mental wellbeing, and put me in a perilous position. Forced out of my business, I am now working in a supermarket, with most of my weekly income going towards a legal battle with my landlord to avoid losing everything I have.
Many businesses have faced hard times during this extraordinary year. There have been massive changes that have forced business owners to close down their beloved operations and walk away. Of course, this kind of thing happens all the time. It’s a normal part of the business ecosystem.
But nothing about this year has been normal. And for me, walking away is not so simple.
Due to the way my lease has been written, and the tremendous power it gives my landlord, liquidating my business and terminating my lease means losing my house, my assets and going bankrupt.
Because I have been unable to pay my full rent for the past six months – due to the lockdowns and low foot traffic caused by construction in the CBD – my landlord has locked me out of my business and is launching legal action to come after me for everything they can get.
It all comes down to the personal guarantee clause in my lease, which says if I don’t or can’t meet my obligations, the landlord can take legal action to recoup the value of unpaid rent for the remainder of the lease term – in my case two years.
This is a common clause installed in commercial leases to protect landlords from making a loss due to an unreliable tenant. However, there’s nothing in this clause that allows for the uncontrollable, untenable, once-in-a-century impact of a global pandemic and nationwide lockdown.
Because of what I’ve had to do this year to keep my business afloat, I’m backed into a corner with few credit options available to help me. After the first lockdown, I borrowed $50,000 from the bank to continue paying my debts and staff. Like many others, I also applied for a mortgage holiday under hardship to create breathing space. It seemed like business was starting to improve, and customers were beginning to return. But then Auckland was put into a second lockdown and everything fell apart again.
Now, because of those actions I took, with my business closed and my main income stream gone, there’s no way the bank will loan me any more money to help me pay my debts. I’ve been forced to take a $50,000 second-tier, six-month loan at 15% interest, but it won’t be enough for the landlord to let me walk away.
For the past six months, amid constant lawyer threats and eviction notices, I’ve tried everything in my power to reason and negotiate with the landlord. I’ve tried to come up with a payment plan. I’ve tried to offer rent deferrals. I’ve tried mediation services. Everything has failed.
And it’s not just me. Several of my neighbouring businesses are in a similar position. Some of these people are migrants who have owned their businesses for over 10 years. They don’t want to go bankrupt. Nobody wants to go bankrupt.
So we are asking for your help. But this isn’t just about money or subsidies. This is about doing what’s right and fair, levelling the playing field between tenant and landlord, and putting the small reforms in place that reflect the extenuating circumstances of a global pandemic, and the devastating effect it has had on small businesses in New Zealand.
Earlier this year, a number of small business owners provided input on what was needed to avoid a wave of unjustified bankruptcies and business closures. Your government took this advice on board and attempted to make amendments to the Property Law Act so it would reflect the challenges of the pandemic, and require commercial tenants and their landlords to work together to find a solution and share the financial burden of this crisis – similar to the mandatory code of conduct the Australian government has implemented to protect business owners from serious hardship.
These amendments were blocked by NZ First, and the only help that was made available was an extension on lease termination notice periods and a voluntary mediation subsidy – a useless tool in our case because our landlord does not want to mediate.
Now that NZ First is no longer in your government, we are asking you to urgently review and implement those initial amendments to the Property Law Act as Australia has done – requiring the financial burden of this crisis to be shared equally between tenants and landlords. At the very least, it should place a limit on personal guarantees so that a landlord cannot sue a small business owner for the full term of their lease.
This will give us breathing space, allowing us to pay our landlords a reasonable amount that reflects the challenges of the pandemic. It will allow me to extract myself from this agonising situation without losing my house, which I bought with my life savings after living in my car for months.
We have written this request to minister for small business Stuart Nash, who has said it is up to landlords to voluntarily work with their tenants constructively to find a solution. But we have tried going down this road, and it’s clear some landlords aren’t interested or willing to come to the table – possibly because they themselves are under pressure from their bank.
The power is therefore in your hands to make this happen and ensure the “team of five million” idea isn’t just a PR soundbite. Throughout your term in government, you have constantly affirmed the principles of kindness and compassion, especially towards those who are struggling or at risk. We ask you now to channel that kindness and compassion, to lead with strength and integrity, and implement those reforms. If a country like Australia can do it, we can do it too.
This year has thrown us into a crisis that none of us ever expected or planned for. It has caused unfathomable mental and physical stress, and pushed many of us – once proud and happy business owners – closer towards the edge of poverty.
After the election you said your party would govern for every New Zealander. If you really meant that promise, then please, govern for us.
A desperate small business owner
The Spinoff Daily gets you all the day’s best reading in one handy package, fresh to your inbox Monday-Friday at 5pm.