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Rent rises strangling small business says Motel Association


9 August 2012

Rent rises strangling small business says Motel Association of NZ

The relentless rise of rents is acting as a handbrake on many small businesses and in turn restricting the country’s economic recovery, says the Motel Association of New Zealand (MANZ).

The prevalence of “ratchet clauses” within rental agreements does not reflect the economy or the sector in which the business operates, and assumes the tenant is able to absorb rising costs year in and year out, says MANZ Chief Executive Michael Baines.

“Rents are one of the many costs of doing business which are caught in an upward spiral. This is at a time when the country’s economic recovery is still tentative and global uncertainty threatens,” Mr Baines says.

“Obviously it is to no-one’s benefit to see businesses go to the wall under the pressure of rent rises. So we’d like to see landlords take more of a partnering approach and realise that a tenant paying a manageable rent is better than no tenant at all,” Mr Baines says.

More than 75 per cent of MANZ member motels are in premises that are not owned by the operator. Like many businesses at the smaller end of the scale, the pickup in the nationwide economy does not see the benefits flow evenly to everybody.

Some moteliers are still feeling the pinch after slow years in the tourism sector, while some parts of the country, such as the South Island outside of Christchurch, are continuing to struggle.

New Zealand is in danger of forgetting the boom and bust days of the 1980’s when tenants had to pay ever-increasing rents even as buildings stood empty.

“We’d like to see these ‘ratchet clauses’ phased out of rental agreements and replaced with something that more accurately reflects the businesses’ sector and it’s ability to cope with price increases.”

“By working together, we will build a better and healthier economy in the long run,” Mr Baines says.


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