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Newsroom.co.nz
Newsroom.co.nz
Politics
Jonathan Milne

Bunnings agrees to remove 999 year legal constraint on use of residential land

Bunnings sold land behind its Mount Wellington store for a big residential development, but until last month the new owners were constrained from selling or advertising hardware. Photo: Google Big Drone

The Australian-owned building supplies chain is defending the 16 land covenants it has retained, as protecting the value of its property and marketing investments.

After strong criticism, Australian-owned building supplies chain Bunnings has removed eight property encumbrances – including a 999 year covenant revealed by Newsroom, that stopped any future owner selling or advertising hardware from properties in Auckland's Mount Wellington.

Both the Government and the Commerce Commission have condemned the use of long and anti-competitive land covenants to block other businesses entering the market. But Melissa Haines, the manager of New Zealand's 41 Bunnings stores, insists covenants are used by a number of retailers, and they play a legitimate role.

READ MORE:Warring building firms tie up critical NZ land with 999 year covenantsBig hardware retailer faces court action for blocking competition

"We know land covenants are used by a number of retailers and other businesses across New Zealand, and appreciate there is a legitimate role for them to play when used in accordance with the law," she says.

"In line with other retailers, Bunnings has a small number of encumbrances in place across select sites in New Zealand, which only relate to the land immediately surrounding the stores, or sites that we currently own or occupy. As a matter of course, Bunnings reviews encumbrances it has in place, with a view to remove any that are no longer relevant or necessary, as is the case with Mount Wellington."

Bunnings reviewed its covenants last month, after the Commerce Commission report criticising them. The company says it removed eight encumbrances as they were no longer deemed relevant or necessary, including the one over 12-26D Barrack Road, Mount Wellington.

But it has retained 999 year covenants over three other sites – two more in Mount Wellington, and one in Palmerston North. It says the circumstances for those properties are different: one that Bunnings owns, one that it now rents, and the Palmerston North retail block that is, as Bunnings characterises it, located within the store’s carpark.

Newsroom has asked three time how the company justifies 999-year leases, but has received no explanation.

(No other supermarket or building supplies company, the two industries subject to the recent Commerce Commission criticisms, now holds or enforces 999 year covenants).

"The encumbrances can help to protect the value of our investment in securing these sites and establishing the location as a destination for our customers," Haines says. "This could include preventing our signage from being obscured by new buildings, and encouraging a mix of adjoining businesses which compliment our offer.

"We’re supportive of the Commerce Commission’s focus on land covenants, and welcome any changes that help to prevent anti-competitive behaviour." 

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