Edmonds Judd

First Job

For many of us the recent lockdown brought a sense of déjà vu. Once again, a number of us were back juggling Zoom calls while supervising school work from the confines of our own homes. The landlords and tenants amongst us were again grappling with the issue of how the lockdown affects lease obligations.

Businesses which were not deemed ‘essential’ were prohibited from accessing their premises during Alert Level 4, and for some of you this meant your business could not earn any income during that period or revenue was severely reduced.

Is rent relief available?

The first place to look for rent relief options is in your lease itself. The most common form of commercial lease is the Auckland District Law Society (ADLS) lease. If you’ve entered into an ADLS lease in or after 2012 it is likely to contain clause 27.5 which deals with situations where tenants are unable to gain access due to an ‘emergency’.

Although this clause was originally introduced as a result of the Christchurch earthquakes and tenants being unable to enter undamaged premises which were in the locked down ‘red zone’, the term ‘emergency’ includes epidemics such as Covid. Clause 27.5 states that if a tenant is unable to gain access to their premises in an emergency ‘to fully conduct the tenant’s business’ due to a restriction on occupation by a competent authority then a ‘fair proportion of the rent and outgoings shall cease to be payable’ during the period they are unable to access their premises.

What is a ‘fair proportion’?

Eighteen months after the first Covid lockdown, there is still no guidance from the courts as to what a ‘fair proportion’ is as disputes between landlords and tenants have either been resolved through agreement or by arbitration. While fairness is ultimately in the eye of the beholder, the following factors should be considered:

  • Fairness to both parties: Both the landlord’s and tenant’s situations should be taken into account in determining the extent to which a reduction is ‘fair’. While the income of most tenants will be impacted by a lockdown, many landlords will also have mortgages and other outgoings and rely on the rent to meet those obligations.
  • Nature of a tenant’s business: Businesses will be affected differently by the lockdown. At one end of the scale there are ‘essential businesses’ such as supermarkets which may continue to fully operate from their premises.

At the other end of the scale, cafés and restaurants will not be able to operate at all. Also in the mix are professional services businesses such as law and accounting firms where staff may be able to continue to work from home but have access to the server situated on the premises. Many businesses will have important items stored at their premises so will continue to gain some benefit from the premises during their lockdown. The proportion of the rent reduction is likely to be affected by the benefit the business gains from the premises.

Rent relief period?

Clause 27.5 applies to situations where a tenant is not allowed to access their premises due to an emergency ‘to fully conduct the tenant’s business’. If a tenant can access the premises, but still can’t fully operate, they may claim an abatement of a ‘fair proportion’ of the rent and outgoings for as long as they cannot access the premises to fully conduct their business due to the emergency.

The clause is not intended to deal with situations where a tenant’s turnover has been affected by a market downturn which is not related to access to premises.

Resolving rental issues

We recommend that landlords and tenants attempt to negotiate an acceptable outcome for both parties in good faith. If an agreement cannot be reached it is likely that the lease will require the dispute to be resolved by mediation, and then arbitration if mediation is not successful.

It is in the interests of both parties that tenants survive this difficult period and that they maintain a good relationship.

Lease does not provide for rent relief?

An early November 2021 amendment to the Property Law Act 2007 effectively inserts a new clause similar to clause 27.5 into those commercial leases which do not currently have a rent relief clause. The deemed clause took effect (retrospectively) from 28 September 2021 and only applies in relation to epidemics. The new law does not define ‘fair proportion’, so there will still be a need for negotiation, then possibly arbitration.

The legal doctrine of ‘frustration’ also provides a potential legal argument in favour of tenants.

It is important that any agreement on rent relief is properly documented. We will be happy to assist you with this, and help you with any negotiations with either your landlord or tenant during these Covid times.

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Working from home

Tax status of allowances

Most, if not all, employers and employees will now be familiar with the once illusive and distant concept of working from home (WFH). Since Covid reached our shores, flexible working practices have evolved with more employees now preferring to work remotely in any alert level, either on a full-time or part-time basis.

WFH brings unique challenges that are otherwise not encountered in an office environment. One commonly-faced situation by both employers and employees is the blurred line around work and home life. This is more than just a decrease in the ability to switch off from work; it also relates to work use of a household’s power, internet and phone.

Both employers and employees should be aware of the tax implications of such costs of WFH. Employees cannot personally claim a tax deduction for costs incurred in carrying out their employment duties, such as WFH costs. If employers wish to contribute to their employee’s WFH expenses and compensate them accordingly, in some circumstances that compensation will be taxable income for the employee; in some circumstances, it will be tax-exempt. Inland Revenue has provided a simplified way for employers to determine whether, and to what extent, such a payment is taxable or not; it recently extended this method for the period from 1 October 2021 to 31 March 2023.

Inland Revenue has a great deal of information about WFH; to read this go here 

If you have specific enquiries about WFH tax obligations, do contact your accountant. Employers may also want to draft a WFH policy that outlines their expectations about this new way of working; we can help you with that.

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Since the launch of government-funded Digital Boost in late 2020, more than 40,000 small businesses have signed up. Digital Boost is a joint initiative between the Ministry of Business, Innovation and Employment (MBIE) and the private sector. Its purpose is to get small businesses to not only acknowledge, but also to use, the benefits that come from digital tools and technologies.

Adding to its existing toolbox, Digital Boost recently launched a new Digital Boost Live app. MBIE says that it wanted to make Digital Boost content more accessible to people who work more from their mobile phones and to give businesses up-to-date digital information “in the palms of their hands”.

Features include:

  • More than 500 short three-to-five minute learning videos including how to use digital marketing to increase sales
  • Podcasts with business owners
  • Hundreds of downloadable learning summaries
  • Case studies featuring Kiwi small business owners, and
  • Live Q&A sessions.

Digital Boost Live is available free at the App Store or Google Play. For more about Digital Boost go here

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Having a puff at work

Vaping now treated the same as tobacco smoking

New Zealand laws have finally caught up with vaping (also called e-cigarettes) that have, for some time, enjoyed freedom from the country’s strict tobacco regulation.

Since 11 November 2020, however, all vaping products and behaviours must now be treated the same as for tobacco products and smokers. All businesses and employers should be aware of the changes to SmokeFree legislation; for retailers of any vaping-related products these changes are especially important.

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Best to sign again after lockdown to avoid later complications

During the Covid lockdown, special rules applied to the signing of some legal documents. Obviously it was, and is, not possible to have your signature witnessed by someone outside your bubble in Levels 3 and 4. So the law allowed signing over audio-visual link (AVL) and other similar arrangements. While these documents will remain valid in the future, it may be wise to have wills and enduring powers of attorney (EPAs) signed out of lockdown to avoid any time-consuming queries later on.

Many legal documents need to be signed in a particular way or before a particular person. For example, some documents such as affidavits must be signed in front of a JP or lawyer. As this was, and is, not possible during lockdown, special rules were put in place to enable people to sign documents such as wills, EPAs, affidavits and so on.

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Over the fence

Genuine reasons for fixed-term employment

Fixed-term employment agreements are a useful tool when, as an employer, you do not require a permanent employee but need an employee for a stated period of time, or until the conclusion of a specific project, or for a specified event.

The Employment Relations Act 2000 imposes specific requirements that must be complied with for a fixed-term employment agreement to be valid.

You must have ‘genuine reasons’ based on reasonable grounds for making the employment fixed-term.

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Going out on your own

Company structure or sole trader for business?

You have decided to quit your job, and go out on your own to run your own business. Do you form a company or trade in your own name? We outline some of the pros and cons of these two options to help you make a decision.

Trading through a company

Brown Biscuits Limited: owner Jackie Brown

Brown Biscuits Ltd (BBL) is a separate legal entity. There are some significant advantages of trading through a limited liability company.

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