On 13 August 2021 the Retail and Other Commercial Leases (COVID-19) Amendment Regulation 2021 came into effect.
Things to note:
- The Prescribed Period is extended to 13 January 2022, so it applies for the period 13 July 2021 to 13 January 2021.
- A Lessor is prohibited by increasing rent during the prescribed period if the lessee is an “Impacted Lessee”
- A Lessee is required to provide evidence that they qualify as an “Impacted Lessee”
- The ability and requirement to negotiate and renegotiate rent is still present as was contained in 2020’s COVID-19 Rent Relief legislation.
- The parties are to act in good faith like before and in accordance with previous relief provisions that came from the National Cabinet Mandatory Code of Conduct. This Code of Conduct can be located here: https://www.pm.gov.au/sites/default/files/files/national-cabinet-mandatory-code-ofconduct-sme-commercial-leasing-principles.pdf
- If a Lessee can continue to pay rent as usual in accordance with the Lease they should continue to do so. If there has been a financial detrimental impact or distress as a result of COVID-19 then the Lessee and Lessor should negotiate.
- Any agreed rent reductions should be proportional and based on decline in turnover to ensure that any burden is shared between both the Lessor and Lessee. Negotiations should take into account the economic impact of the COVID-19 pandemic and the leasing principles set out in the National Cabinet Mandatory Code of Conduct.
- The leasing principles state that at least 50% of the rent reduction must be a waiver and the balance is deferred. This requirement for at least a 50% waiver can be agreed to be amended by agreement only.
- Unless otherwise agreed to by the parties, re-payment of rental deferrals by the Lessee must be amortised over the balance of the lease term and for a period of no less than 24 months, whichever is the greater.
- To be an “Impacted Lessee” a Lessee must:
- qualify for 1 or more of the 2021 COVID-19 Microbusiness Grant, 2021 COVID-19 Business Grant or 2021 JobSaver Payment; and
- have a turnover for the 2020/2021 financial year of less than $50 million. If the tenant is a franchisee, the turnover of the business conducted at the premises is the relevant turnover. If the tenant is a member of a group, the turnover of the group is the relevant turnover. In any other case the turnover of the business conducted by the lessee. Turnover includes any turnover derived from internet sales of goods and services; and
- have entered into their lease before 26 June 2021.
- A Lessor cannot take any Prescribed Action in relation to an Impacted Lease if an Impacted Lessee fails to pay rent or outgoings or to trade during the Prescribed Period unless the parties have first renegotiated rent and attempted mediation or subject to another agreement between the parties.
- “Prescribed Action” means taking action under the provisions of a commercial or retail lease or seeking orders or issuing proceedings in a court or tribunal for any of the following—
(a) eviction of the lessee from premises or land the subject of the commercial lease,
(b) exercising a right of re-entry to premises or land the subject of the commercial lease,
(c) recovery of the premises or land,
(d) distraint of goods,
(g) requiring a payment of interest on, or a fee or charge related to, unpaid rent otherwise payable by a lessee,
(h) recovery of the whole or part of a security bond under the commercial lease,
(i) performance of obligations by the lessee or any other person pursuant to a guarantee under the commercial lease,
(k) termination of the commercial lease,
(l) any other remedy otherwise available to a lessor against a lessee at common law or under the law of this State.
- An act or omission of an Impacted Lessee required under a law of the Commonwealth or the State in response to the COVID-19 pandemic is not a breach of the impacted Lease and cannot be relied upon by the Lessor in order to take any enforcement action.
- The Lessor and Lessee must attend mediation before the Lessor has the ability to:
- seek to recover possession of premises under an impacted lease;
- terminate an impacted lease; or
- exercise or enforce any other right of the landlord under an impacted lease,
The Lessor would only be able to take the action above in i-iii above if the Small Business Commissioner has certified in writing that mediation has failed to resolve the dispute between the Lessor and Lessee and has provided reasons for the failure of mediation.
Some additional Items to note:
- Land Tax Relief
The NSW Government has introduced this measure. Any landlord that provides rent relief to eligible tenants can apply for land tax relief. Applications and further information can be found on the Service NSW website here:
- Hardship Fund
The NSW Government has also announced a new $40million Hardship Fund to provide a monthly grant of up to $3,000 for small commercial or retail landlords who provide rental waivers. Further information on this is yet to be released by the NSW Government.
If you have any questions or wish to discuss COVID-19 Rent Relief, please do not hesitate in contacting Gillian Leahy of this office.