Alert Level 3: Big change for some commercial tenancies, very little change for others

Alert Level 3 began at 11.59pm on 27 April 2020, with the implementation of the Health Act (COVID-19 Alert level 3) Order 2020 (the Level 3 Order).

For some people and businesses this change provides welcome relief to revive business operations (albeit with some modifications), but for others very little has changed.

Under the Level 3 Order:

  • People must still stay at home and maintain physical distancing but, unlike Alert Level 4, there is now an extensive list of permitted circumstances where people can leave their ‘bubble’, and these include attending your (regional) workplace, provided infection control measures exist.
  • Different infection control measures, including meeting specific physical distancing requirements, apply to different categories of business or services.
  • Any business that is unable to, or otherwise does not, operate under the relevant control measures must remain closed.

If you are contemplating returning to your workplace, we strongly recommend you review clause 10 of the Level 3 Order in particular, to ensure you are able to comply with the relevant infection control measures.  If you have any queries around those requirements, one of our experts can assist you.

What does this mean for commercial landlords and tenants?

There was a lot of talk during the Alert Level 4 lockdown of the ‘no access in emergency’ clause that exists in certain leases. In the current Alert Level 3 circumstances, we consider the prerequisites for this clause to apply will likely still be met for many tenancies: the extensive control measures will effectively mean that some businesses won’t yet be able to open their premises. For other businesses, the restrictive nature of the control measures will likely mean that they still cannot “fully conduct” their business from their premises.

In both of these cases, landlords and tenants will need to continue conversations as to what constitutes a “fair proportion” of annual rent and outgoings abatement, noting that what’s “fair” will involve consideration of the extent that the tenant can now access its premises, amongst other things.

Similarly, where a lease does not contain a ‘no access in emergency’ clause, Alert Level 3 changes little –  the relevant landlords and tenants will still have to work together to find an acceptable solution to the operational and economic impacts of COVID-19.

So, during Alert Level 3, for a lot of commercial landlords and tenants nothing much will change. The message ‘we’re all in this together’ remains, and both parties need to continue to work together in an open and respectful way to get through.

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