Temporary Covid-19 rent relief for Retail, Commercial & residential tenants

Greater Sydney has been in lockdown due to the COVID-19 pandemic since 26 June 2021. The NSW Government has introduced temporary relief for impacted tenants.

This article briefly explains the rights and obligations which tenants and landlords have under the temporary COVID-19 rent relief laws in New South Wales.

RELIEF FOR RETAIL AND COMMERCIAL TENANTS

Last year the Government introduced the National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19 (National Code of Conduct), adopted on 7 April 2020, as well as the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (No 3) (NSW), which was in force between 24 April 2020 and 28 March 2021.

The NSW Government has now introduced the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (as amended on 13 August 2021), which applies:

  • during the period 13 July 2021 to 13 January 2022 (prescribed period);
  • to retail and commercial leases entered into before 26 June 2021 (unless pursuant to an option, extension or renewal);
  • to an impacted lessee who has failed to pay rent or outgoings or has not being open for business during the hours specified in the lease (prescribed breach).

Following amendments to the Regulation on 13 August 2021, the National Code of Conduct must be considered:

a) by parties when renegotiating rent (and other terms of an impacted lease), and
b) by a Tribunal or Court when considering whether to make a decision regarding recovery of possession of land, termination of an impacted lease or enforcing any other rights under an impacted lease.

Impacted Lessees

An “impacted lessee” is a lessee which:

  1. qualifies for one or more of the following grants:
    • 2021 COVID-19 Micro-business Grant
    • 2021 COVID-19 Business Grant
    • 2021 Job Saver Payment; and
  2. had a turnover of less than $50 million in the 2020-21 financial year.

Evidence to be provided by an impacted lessee to the landlord

If requested by the landlord, or before or as soon as practicable after a prescribed breach occurs, an impacted lessee must give the landlord the following information in respect of the impacted lease:

(a) a statement to the effect that the lessee is an impacted lessee,

(b) evidence that the lessee is an impacted lessee.

Such evidence is likely to include evidence that the lessee qualifies for or has obtained a relevant Grant, evidence of a reduction in turnover of over 30%, and/or evidence that the lessee is on the list of Highly Impacted Industries (see Attachment A to the 2021 COVID-19 business grant – Guidelines: 2021 COVID-19 business grant – Guidelines | Service NSW for the list of Highly Impacted Industries).

For further information please see Attachment A to the 2021 COVID-19 business grant – Guidelines: 2021 COVID-19 business grant – Guidelines | Service NSW.

Actions prohibited by a Landlord

A landlord must not increase the rent payable under an impacted lease during the prescribed period (other than rent or a component of rent determined by reference to turnover).

A landlord must not take any of the following action against an impacted lessee on the grounds of a prescribed breach of an impacted lease occurring during the prescribed period:

  • • taking action under the provisions of a commercial 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) seizing,

    (e) forfeiture,

    (f) damages,

    (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,

    (j) possession,

    (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

    (prescribed action),

unless:

(a) the matter has been referred for mediation under the Act, Part 8, Division 2, and the Registrar has certified in writing that the mediation has failed to resolve the dispute; and

(b) if the lessee has requested a renegotiation under clause 6D, the lessor has complied with that clause

Obligation to renegotiate rent

A party to an impacted lease may request that the other parties renegotiate the rent payable, and other terms of, the impacted lease. If requested, a party must renegotiate in good faith the rent payable under, and other terms of, the impacted lease and commence renegotiations within 14 days of receiving the request (or other period agreed by the parties). The parties must take into consideration the economic impacts of the COVID-19 pandemic and the leasing principles set out in the National Code of Conduct.

Actions permitted by a Landlord

The Regulation does not prohibit a Landlord from taking prescribed action on grounds not related to the economic impacts of the COVID-19 pandemic. For example, if a lessee breaches a non-financial term of the lease (such as damage to property) or fails to vacate premises following the expiry of a fixed term commercial lease.

RELIEF FOR RESIDENTIAL TENANTS

The NSW Government has introduced a 60 day freeze on evictions for residential tenants who are impacted by COVID-19 and cannot meet their rent payments during the period 14 July 2021 to 11 September 2021.

The 60 day freeze does not apply to terminations for other reasons, such as damage to property or other non-financial breaches of the residential tenancy agreement.

Eligible residential tenants

To be eligible for the protection against eviction, a tenant needs to:

  1. show that rent paying members of the household are impacted by COVID-19 and have lost employment, work hours or income or have had to stop working because they or other members of their household (or in their care) were/are ill with COVID; and
  2. show that the household’s take home weekly income has reduced by 25% or more (including any government assistance received) compared to the weekly income received in the 4 weeks prior to 26 June 2021; and
  3. continue to pay at least 25% of the rent payable.

Landlords and tenants are encouraged to work together and negotiate rent reductions if a tenant is COVID-19 impacted and is unable to pay the full rent. A rent reduction agreement will vary the rent payable under the tenancy agreement, and if a tenant then pays the reduced rent they will not accrue arrears.

RELIEF FOR LANDLORDS

Eligible landlords who have reduced their tenant’s rent due to COVID-19, between 1 July 2021 and 31 December 2021, may apply for land tax relief. To be eligible for land tax relief, landlords need to:

  • be leasing property to:
    • a commercial tenant who has:
      • an annual turnover of up to $50 million, and is eligible for the:
        • Micro-business COVID-19 Support Grant
        • 2021 COVID-19 NSW Business Grant and/or
        • JobSaver scheme, or
    • a residential tenant who has lost 25% or more of household income due to COVID-19.
  • have reduced the rent of the affected tenant for any period between 1 July 2021 and 31 December 2021;
  • have provided the rent reduction without any requirement for it to be paid back at a later date;
  • have a 2021 land tax liability attributable to the parcel of land where the rent reduction has been given.

Alternatively, eligible residential landlords who have provided a rent reduction to COVID-29 tenants may apply for a Residential Tenancy Support Payment of up to $1,500.

A new $40 million Hardship Fund will also be established to provide a monthly grant of up to $3,000 for small commercial or retail landlords who provide rental waivers of at least the value of the grant and any land tax relief they are eligible for.

WHAT SHOULD LANDLORDS AND TENANTS DO?

Landlords and tenants impacted by COVID-19 should seek to negotiate rent reductions or attempt to come to an arrangement through mediation. Tenants should ensure that they continue to comply with all other non-financial terms of the lease.

If you are a landlord or tenant and require advice regarding your options, please contact Connor & Co Lawyers.

Amanda Johnstone | Partner | Connor & Co Lawyers
P: +612 9299 6696 | E: amanda.johnstone@connorco.com.au

About Connor & Co Lawyers

We are a Law firm located at Level 5, 50 Margaret Street Sydney NSW 2000 specialising in Business law, Dispute Resolution, Litigation and Land & Environment matters.

Email: contact@connorco.com.cau Website: www.connorco.com.au Ph: 0292996696

Important Note:
This article is not intended to be a comprehensive summary of the law. Nor is intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader’s specific circumstances. Please do not hesitate to contact Connor & Co Lawyers on 92996696 if you would like to know more or wish to obtain legal advice that is relevant to your circumstances.