The NSW Government has extended the protections afforded to commercial and retail lessees in response to the COVID-19 pandemic, with some important changes.
Under the new Retail and Other Commercial Leases (Covid-19) Regulation 2022 (Amended Regulations) the protections continue to apply to commercial and retail leases:
- until 30 June 2022;
- where the lease was entered into before 26 June 2021;
- in respect of ‘prescribed breaches’ occurring before 13 March 2022.
Below are the key changes affecting current arrangements and future negotiations under the Amended Regulations.
Prescribed period
The prescribed period now runs from 13 July 2021 until 30 June 2022.
This means during this prescribed period, a landlord cannot take ‘prescribed action’ against the impacted lessee in response to a failure to pay rent or outgoings, or the business operating under the lease not being open for business during the hours specified in the lease (prescribed breach).
Renegotiation before lessor can take prescribed action
Section 9(1A) dispenses with the requirement to renegotiate the lease where the impacted lessee commits a prescribed breach after 13 March 2022, however the parties must still engage in compulsory mediation before prescribed action can be taken.
Amendment to definition of impacted lessee
Section 4 amends the criteria required to qualify as an “impacted lessee”.
An impacted lessee is one that qualifies for one or more of the following:
- 2021 COVID-19 Micro-business Grant,
- 2021 COVID-19 Business Grant,
- 2021 JobSaver Payment, or
- 2022 Small Business Support Program (this being an addition to the previous criteria).
In addition, the impacted lessee must provide evidence that its turnover for the 2020-21 financial year was less than $5 million (a reduction from the previous requirement of $50 million).
Consideration of leasing principles
The National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19 (Code) sets out the leasing principles which should be adhered to by landlords when negotiating temporary rent relief arrangements with an impacted lessee during the COVID-19 pandemic period.
Previously, a court or Tribunal was required to consider the leasing principles under the Code when making decisions or orders in relation to:
- The recovery of possession of premises or land from an impacted lessee;
- The termination of an impacted lease by a lessor; or
- The exercise or enforcement of another right of a lessor under an impacted lease.
The new section 15(2) brings an end to this requirement where prescribed action is taken against an impacted lessee for a prescribed breach occurring after 13 March 2022.
Impact on lessors
Whilst the level of protection has been significantly reduced for prescribed breaches occurring after 13 March 2022, lessors ought to remain mindful of their obligations under the regulations to negotiate rent relief arrangements, and/or mediate disputes, with eligible lessees.
It is prudent that any arrangements for rent relief and any renegotiated terms are formally documented.
Please contact us for further information or for a confidential discussion.
Article prepared by: Margaret Gotsopoulos, Lawyer & Andrew Campbell, Partner
