The Government is no longer pursuing a law change to help commercial rent disputes because consensus could not be reached with New Zealand First - but $40 million is still being allocated to assist disputes.
Justice Minister Andrew Little announced in June a temporary change to the Property Law Act to ensure businesses suffering as a result of the COVID-19 response would get help to resolve disputes over rent costs.
The Government allocated $40 million to provide access to arbitration - basically independent dispute settlers - to support small or medium businesses to reach agreement on fair rent.
But Little said on Thursday the Government is no longer going ahead with the law change because it could not reach consensus with New Zealand First.
"New Zealand First do not support the previously proposed legislation and they do not support this action," a statement from Little's office said.
"However I think we have reached a good solution that will be of assistance to many small businesses across New Zealand as they face the ongoing economic effects of COVID-19."
Little said the Government is still allocating $40 million to assist with the cost of mediation and arbitration for New Zealand businesses and landlords to resolve issues about adjusting rent as they face the economic impacts of COVID-19.
The $40 million will provide a subsidy of up to $6000 per arbitration, meaning in many cases, the Crown will cover about 75 percent of the arbitration cost.
Business must have 20 or fewer full-time staff at each leased site and be based in New Zealand to be eligible. Businesses and landlords who have already breached agreements in response to COVID-19 cannot access it.
"As the Government will not be progressing legislative change, this would be a voluntary scheme of subsidised mediation, Little's office said.
"This funding will ensure that tenants and landlords, even if financially constrained, will be able to access dispute resolution services," Little said.
"I continue to encourage businesses and landlords to work towards reaching a fair agreement on the payment of rent and using this funding to access mediation and arbitration services if that helps."
New Zealand First leader Winston Peters said last month Labour had originally proposed the solution for all existing lease arrangements and claims his party is responsible for watering the policy down.
This would've been poorly targeted policy and affected many landlords who've sensibly adapted to the changed circumstances brought by COVID-19," Peters said at the time.
"Using a sledgehammer to smash a nut is not common-sense. We must remember the sanctity of contracts is a crucial dimension to settled law."
Further detail about eligibility for and availability of the subsidy will be made available on the Ministry of Justice website, and the service will be up and running within eight weeks, Little's office said.
The funding can be used for arbitration on existing contractual terms, or to access subsidised mediation.