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Ratchet rents will drive businesses to the wall


27 August 2012

Ratchet rents will drive businesses to the wall says Motel Association of NZ

The ratcheting upwards of rents is threatening the existence of many small businesses and need to be dumped in favour of a more flexible system, says the Motel Association of New Zealand (MANZ).

The prevalence of ‘ratchet clauses’ within rental agreements is a blunt instrument which does not reflects the range of different environments that New Zealand’s small businesses operate in, says MANZ Chief Executive Michael Baines.

“Rents are one of the many costs of doing business which are caught in an upward spiral at a time when the country’s economy is still weak,” Mr Baines says, adding “the prevailing view among landlords seems to be that tenants can absorb rising costs year in and year out, regardless of how the business is doing.”

“If we don’t move to a more flexible approach, we are going to see many small businesses driven to the wall by ever-increasing rents,” Mr Baines says. “All it needs is landlords talking more to tenants. There is usually a solution that can be found by the two parties working together, and landlords should remember that even if a tenant ends up paying reduced rent, that is better than no tenant at all.”

More than 75 per cent of MANZ member motels are in premises that are not owned by the operator. Like many small businesses, the pickup in the nationwide economy has not seen the benefits flow evenly to everybody.

Some moteliers are still feeling the pinch after some slow years in the tourism sector, while 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 were forced to pay ever-increasing rents even as many buildings stood empty, Mr Baines says.

“By working together, we will build a better and healthier economy in the long run, and that benefits both landlords and tenants,” Mr Baines concluded.


About MANZ: The Motel Association of New Zealand is the representative body for the motel industry, with 900 plus members throughout the country. MANZ works to promote the interests of motels and the wider tourism sector, and to constantly improve the services offered by motels. By staying in a MANZ motel guests, are assured of a high standard of accommodation, hospitality and service.

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