Many businesses have been impacted by the effects of the Coronavirus COVID-19 pandemic and as a result both Landlords and Tenants subject to commercial leasing arrangements have suffered financially.The Commonwealth Government has introduced a number of initiatives to support Landlords and Tenants to ensure continuity of commercial tenancies.The State and Territory Governments have also made a number of changes to legislation and policy in line with the directives from the National Cabinet.We have summarised some of the key changes to assist Landlords and Tenants develop strategies to help your business while there remains uncertainty in the commercial sector.
National Cabinet Mandatory Code of Conduct
On 3 April 2020 the Commonwealth Government through the newly constituted National Cabinet introduced the National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19.The Code contains a number of good faith leasing principles which Landlords and Tenants must adhere to during the period where Tenants have been affected by the impacts of COVID-19.In order for a Tenant to be eligible for relief under the Code the Tenant must be eligible for the Commonwealth Government Jobkeeper Payments and be able to prove that they have suffered significant financial loss as a result of COVID-19.
The overarching principles of the Code provide that Landlords and Tenants will negotiate in good faith in the event of a Tenant suffering financial distress as a direct result of the effects of COVID-19, and the parties will work to come to an amicable arrangement in the payment of commercial rent and other outgoings.This may be negotiated by way of a rental deferral or waiver dependant on the individual circumstances of the Tenant or Landlord.
Landlords are also not permitted to terminate commercial tenancies on the basis of non-payment of rent during any period where a tenant has suffered loss due to COVID-19.This does not apply to periodic holding-over leases where the Tenant is occupying commercial premises on a month-to-month leasing arrangement due to an expired Lease.
Australian Capital Territory
The ACT Government has introduced a number of changes to assist landlords and tenants who have been impacted by the COVID-19 pandemic.These measures include:
- a)applying rebates to Landlord’s general rates on provision of certain evidence showing that they have reduced rent for tenants or applied a rental deferral or rent reduction;
- b)Mandatory negotiations for Landlords and Tenants to resolve disputes where the Tenant cannot pay rent; and,
- c)Introducing a tiered category system to assist business tenants and owner operators suffering financial hardship as a result of COVID-19 by gaining access to the greatest amount of support.
These changes were brought about by the introduction of the COVID-19 Emergency Response Bill 2020 (ACT) which was passed by the Legislative Assembly on 2 April 2020.
The ACT Government has also mandated that Tenants and Landlords adhere to the provisions of the National Code introduced by the National Cabinet.
NSW
In New South Wales the Legislative Assembly and Legislative Council introduced the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) giving effect to the provisions of the National Code.Incorporated in these changes are the requirements for Tenants under commercial leases to demonstrate financial hardship, and that Landlords are prohibited from the exercise or enforcement rights under commercial leasing arrangements, such as termination of Leases or drawing down of security bonds in the event of non-payment.
These changes are to apply between 24 April 2020 and 24 October 2020.In NSW for a tenant to be eligible to seek relief from a Landlord they must qualify for the Jobkeeper Payment arrangements and he annual turnover of that business in the 2018/2019 financial year must have been less than $50 million.
It is also recommended that Landlords and Tenants work to negotiate new Leases if there is a periodic agreement.
At Symons Phillips Lawyers we are conscious of the uncertainty surrounding these significant changes in the commercial leasing area and we are able to provide you with advice and assistance.We are can also assist with the negotiation and preparation of new commercial Leases for both Tenants and Landlords.
Rebecca Tesic
Commercial Partner
Sam Doyle
Paralegal