The New South Wales government passed the Retail and other Commercial Leases (Covid-19) Regulations 2020 (Regulations) on 24 April 2020 and the provisions became effective from that date.
The Regulations expand on the provisions of the Mandatory Code. In general terms, they provide the following:
a) Impacted lessees, being tenants of a retail or commercial lease that qualify for the JobSeeker scheme and have a turnover of less than $50m in the 2018-2019 financial year are entitled to the benefit of the Regulations.
b) The Regulations do not apply to leases entered into after 24 April 2020 but do include leases that are renewed or extended through an option after that date.
2. Landlord’s restrictions during prescribed period
a) Tenants are covered by the Regulations and are protected to some extent. A landlord is prohibited from taking any action, such as eviction or termination of a lease, during a 6 month period from 24 April 2020 if the tenant fails to pay rent, fails to pay outgoings and the business reduces its operating hours despite those hours being nominated in the lease.
b) The rent must not be increased during this period.
3. Parties must negotiate in good faith
a) The landlord and tenant must, if requested by one or the other, negotiate in good faith in regard to the rent payable or other terms of the lease.
b) The Code (which the Regulations refer to) sets out principles of relief which are taken up by the Regulations. The relief must be proportionate to the decline in the tenant’s turnover during the Covid-19 pandemic period and a reasonable subsequent recovery period.
c) The parties are required to enter into mediation to resolve any disputes before the landlord can recover possession. (See below).
4. Financial evidence
a) The landlords are entitled to ask for reasonable evidence of the tenant’s financial position.
b) Tenants may want to keep their financial information confidential so landlords and tenants will need to agree on the financial evidence required to prove the tenant’s decline in turnover.
c) The length of the pandemic is unclear and therefore, the rent relief measures may need to be revised or revisited as the extent of the pandemic unfolds.
Hones Lawyers can provide legal advice to the tenants or landlords as needed. In addition and by our separate and associated group Comstra Mediation Pty Ltd, mediation services can be provided to both parties to reach agreement on the terms of any variation to the lease or repayment terms, including catch up repayments at the end of the period as prescribed by the Regulations. This mediation is not part of the compulsory mediation prescribed however the parties are entitled to enter into a binding agreement to determine their future relationship. Early resolution will give both parties the security of tenure and an ability to put in place a business plan for the recovery of future business activities.
Due to current distancing measures in place, mediation is conducted via Zoom video conferencing.