Yes, you can usually borrow to clear commercial rent arrears in New Zealand, and the timing matters more than the amount. A landlord can’t cancel your lease for unpaid rent until it’s at least 10 working days overdue and a written notice giving you at least 10 working days to pay has run out. Money that lands inside that window keeps the lease, the fit-out and the location you’ve spent years building.
If a letter from your landlord or their lawyer is sitting on the counter right now, take a breath. You have more time than it feels like, and less than you’d like. Here’s how to use it.
Why commercial rent falls behind in the first place
Rent is often the first bill to slip, because it feels like the most patient creditor. Inland Revenue sends automated reminders, suppliers put you on stop, staff need paying on Thursday. The landlord, who you might have known for years, gets pushed to next month.
That works until it doesn’t. A change of property manager, a sale of the building or a landlord with their own mortgage pressure can turn a friendly arrangement into a formal notice almost overnight. None of this means you’ve run the business badly. It usually means a slow season, a lost contract or a tax bill landed at the same time.
What the law says your landlord must do first
New Zealand has a fixed process for cancelling a lease, and landlords can’t contract out of it. The rules for unpaid rent are in section 245 of the Property Law Act 2007:
- the rent must have been in arrears for not less than 10 working days;
- the landlord must serve a notice that sets out the breach and the amount owed;
- the notice must give you at least 10 working days after service to pay;
- it must say that the landlord may cancel the lease if you don’t, and that you can apply to the court for relief.
There’s a catch. The two 10-day periods can run at the same time. A landlord can serve the notice the day after rent is missed, so the earliest they can cancel is about two working weeks after the missed payment, not four.
Working days leave out weekends and public holidays, and the summer holiday period is treated differently, so take extra care with a notice served in December. Write the service date and the expiry date on the notice itself, then ask a lawyer to check your count by email.
What if the notice is wrong?
Notices that leave out required content or are served badly can be challenged. That’s worth a lawyer’s look, but don’t plan around it. A defective notice usually just means the landlord sends a corrected one, and you’ve lost a week arguing instead of funding.
Re-entry, possession orders and what happens to your gear
Once a valid notice has expired unpaid, the landlord can cancel the lease in one of two ways: get a possession order from the court, or peaceably re-enter. In practice, peaceable re-entry usually means turning up out of hours, changing the locks and putting a notice on the door.
A few things owners often don’t know:
- Your stock and equipment aren’t the landlord’s to sell. The old right of distress, which let landlords seize a tenant’s goods for rent, was abolished by the Property Law Act 2007. Getting your things back after a lock-out can still take time and negotiation, though.
- The debt doesn’t vanish when the lease ends. The landlord can still sue for unpaid rent, and may claim future losses too.
- Personal guarantees come into play. Most commercial leases have the directors guaranteeing the rent. Our guide to how directors’ personal guarantees work explains how far that can reach.
- A statutory demand may follow. Unpaid rent is a debt like any other, and some landlords use a statutory demand to push harder.
Can you get the lease back after a lock-out?
Sometimes. Under section 253 of the Property Law Act 2007, the tenant can ask the court for relief against cancellation. If the landlord has peaceably re-entered, that application must be filed within three months of the re-entry.
Relief is a real remedy, but it’s a slow and expensive way to get your keys back. Courts generally expect the tenant to pay the arrears and the landlord’s costs as a condition, and the doors stay shut while you wait. Customers drift, staff look for other jobs and stock goes stale. Funding the arrears before the notice expires is far cheaper than winning in court afterwards.
Your options inside the notice period
Think of the notice period as a short project with one goal: clear the arrears in full, or get a written agreement to something else, before the expiry date.
| Option | Works best when | The risk |
|---|---|---|
| Negotiate a payment plan | The landlord wants to keep you and the arrears are small | Only binding if it’s in writing; a verbal “that’s fine” won’t stop the notice |
| Pay from the business’s cash | A good few weeks are coming and the gap is temporary | Can leave you short on wages, GST or PAYE the following week |
| Release equity in property | You or a supporter own New Zealand property with equity | Needs a valuation and legal work, so start on day one |
| Unsecured funding | No property, but six months or more of steady trading | Smaller amounts and shorter terms than property-secured loans |
| Assign or surrender the lease | The site is no longer right for the business | Guarantees and make-good costs often survive the exit |
Business.govt.nz’s guide to leasing premises is a useful refresher on lease terms. Pull out your lease and read the default, guarantee and rent review clauses before you call the landlord.
If you can see the arrears won’t be cleared from trading inside the notice period, start a 60-second enquiry now, not on day nine.
Talking to your landlord without making it worse
Landlords are rarely in a hurry to have an empty shop. Re-letting takes months, and a new tenant may want rent-free periods and a contribution to fit-out. That gives you leverage, if you use it early.
- Call before they call you. Tell them what happened, the figure you’ll pay and when.
- Show evidence. A loan application in progress, a valuation booked or a 13-week cash flow forecast makes your promise believable.
- Get it in writing. Ask for an email confirming they’ll hold off on cancellation until a named date.
- Don’t promise what you can’t fund. Breaking a second promise costs more goodwill than the first missed payment.
Our guide on talking to creditors when your business is struggling goes further, including how to handle a property manager who has stopped returning calls.
Where the money can come from when the bank says no
Rent arrears are a red flag for banks. Specialist lenders look at the property and the plan instead. Through our lending partners:
- property-secured loans run from $20,000 to $1m against New Zealand property, including as a second mortgage behind an existing home loan;
- no financials are needed for the initial assessment of a property-secured loan, which helps when the accounts are behind;
- the landlord can be paid directly at settlement, along with IRD or other creditors if you want everything cleared at once;
- in some cases, funding happens within 24 hours of approval;
- without property, unsecured options for weaker credit may suit businesses trading six months or more.
When rent is one of several overdue bills, consolidating business debt into one repayment can stop the same squeeze happening again next quarter.
A worked example: a Nelson gift shop with nine working days
This is an illustrative composite, not a real client.
A gift and homewares shop in Nelson falls three months behind on rent after a quiet winter and a big terminal tax bill. The landlord’s lawyer serves a section 245 notice on a Monday, giving 10 working days to pay. The two directors have personally guaranteed the lease and own a home with a bank mortgage and reasonable equity.
- Day 1: They read the lease, put the expiry date in their diaries, and email the landlord’s lawyer saying funding is being arranged and asking for an exact arrears figure, including any default interest and costs.
- Day 2: They enquire with a specialist lender, giving the notice, the property address and a list of everything owed, including IRD.
- Days 3–6: A valuation is done and a second mortgage is approved on the property and a simple plan: repay from trading over the next few years, with the option to refinance to the bank once the accounts are up to date.
- Days 7–9: Documents are signed and lawyers settle. The landlord’s lawyer receives the arrears directly and confirms in writing that the notice is satisfied.
The shop never closes. The directors’ guarantee exposure drops back to zero arrears, and Christmas trading, the busiest weeks of their year, goes ahead in the same spot.
Keep your doors open: see if you qualify
We hear from owners every week who’ve let the rent slide to keep staff and IRD paid, and we never judge anyone for it. Your location, your fit-out and your regulars are worth fighting for, and a notice period is enough time to fund the arrears if you start now.
Telling us what’s happened takes about 60 seconds, and there’s no credit check when you first enquire. We don’t hand your details to a pile of lenders, so your phone won’t start ringing with strangers. A real person reads your situation, including the notice date and what you own, and calls you to talk through what’s realistic.
Please fill the form in accurately, especially the amount behind and the date the notice was served, so we can line up the right option first time and keep the deadline in front of you rather than behind you.