You have probably noticed the wave of media coverage surrounding retail closures – EB Games, for example, confirmed it will shut all 38 of its New Zealand stores by 31 January 2026, citing the business as no longer viable. These headlines illustrate the very real pressures faced by many businesses, especially across the retail and hospitality sectors. And behind every closure is a commercial lease – often one of the largest expenses a business carries, second only to staff salaries and wages.
For landlords, this economic landscape can be unsettling. But tough times don’t always have to lead to vacant properties or disputes over unpaid rental and outgoings. With the right approach, landlords can protect their investment, support their tenants, and strengthen long‑term commercial relationships.
We have put together some practical tips to help landlords navigate situations where tenants are doing it tough:
- Open the lines of communication: when tenants face mounting financial pressure, proactive dialogue is essential. Encourage early conversations about cashflow issues or trading impacts. Many tenants hesitate to raise concerns until it’s too late – letting them know that you are willing to talk could be the difference between recovery and vacancy.
- Know your options: take a close look at the lease provisions around:
- rent abatement periods;
- default and remedy periods;
- assignment or subletting rights; and
- any other contractual relief mechanisms.
Understanding these clauses can help you decide whether flexibility is appropriate or whether enforcement action is necessary.
- Consider temporary rent relief or restructuring: in some cases, a short‑term solutions can help both parties. Options include such things as:
- temporary rent reduction or deferral,
- switching to turnover rent for a defined period,
- spreading arrears over structured repayment plans.
A tenant who survives a downturn remains a paying tenant which is often far better than footing the bill for vacant properties, marketing, and fit‑out incentives for a new occupant.
- Assess security options: if the tenant provided a bond, personal guarantee, or bank guarantee, review your rights to call on these if needed. However, caution should be exercised as aggressively enforcing security too soon can push an otherwise recoverable tenant business over the edge.
Balancing commercial pragmatism with legal rights is key.
- Inspect and protect the premises: when a tenant is distressed, maintenance and compliance may slip. Regular inspections (within lease rights) help ensure:
- insurance obligations are met;
- safety standards remain intact; and
- no deterioration to the premises occurs during the financial hardship.
- Explore alternatives before activating your termination. If the tenant business cannot recover, options may include:
- agreeing for the tenant to lease a smaller portion of the premises and the other part is sublet to a new operator;
- if there is some value left in the business, the tenant selling the business and assigning the lease to the new business owner; or
- agreeing to an early surrender of the lease,
in exchange for a negotiated value or compensatory payment.
These approaches can sometimes achieve a better commercial outcome than litigation or forced eviction.
- Keep evidence and seek legal advice early: maintain written records of all discussions and proposals. If the situation worsens, well‑kept documentation will support you in enforcing rights or negotiating exit arrangements.
Legal advice is especially important when considering:
- restructuring arrangements,
- calling on rental bonds or guarantees,
- issuing notices of default, or
- dealing with tenant insolvency risk.
Supporting Struggling Tenants Helps Protect Your Investment. Retail and hospitality operators are operating in one of the toughest climates in years, as shown by the EB Games closures and the long list of other business closures in the past couple of years. As a landlord, how you respond can significantly influence the long‑term stability and profitability of your property.
If your commercial tenant is facing financial difficulty, our experienced commercial team can help you navigate your legal options and develop a strategy that protects your investment while supporting workable solutions. Contact us today for tailored advice specific to your property and tenant situation.