As of 13 August 2021, new regulations have been enacted for retail and commercial leases. Certain protections have been introduced for certain commercial lessees where related businesses have experiences a fall in turnover as a result of lockdowns in New South Wales.
So, what’s changed?
- The prescribed period has been extended, which began on 13 July 2021, to 13 January 2022.
- The landlord has been prohibited from increasing rent during this prescribed period if the tenant has experienced a fall in turnover (impacted tenant).
- The impacted tenant is required to give evidence to the landlord to prove they are considered an impacted tenant.
- Landlords and tenants are required to negotiate rent and other terms of the lease if one of the parties requests the renegotiation.
- The renegotiation must be conducted in good faith with consideration being given to the leasing principles set out in:
- National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID-19 (the National Principles)
- The landlord is required, before taking action against certain breaches of the lease during the prescribed period, to:
- Attempt to mediate the dispute with the impacted tenant, and
- Engage in renegotiation if required.
- Actions of the impacted tenant taken to comply with the law are not breaches of a commercial lease.
- A court or tribunal is required to consider the National Principles when considering whether to make certain orders or decisions relating to commercial leases.
What is expected from the National Principles?
- The overarching principle is good faith.
- Landlords and tenants will act in an open, honest and transparent manner.
- Landlord and tenant cooperation to ensure business continuity and facilitate a return to normal trading activities at the end of COVID-19.
- The parties will assist each other in their respective dealings.
- The Leasing Principles include:
- Landlords must not terminate leases due to non-payment of rent during the COVID19 pandemic period or reasonable subsequent recovery period.
- Tenants must remain committed to the terms of their lease. Material failure to abide by substantive terms of their lease will forfeit any protections provided to the tenant.
- Landlords must offer tenants proportionate reductions in rent payable in the form of waivers and deferrals of up to 100% of the amount ordinarily payable, on a case-by-case basis, based on the reduction in the tenant’s trad during COVID19 period and a subsequent reasonable recovery period.
- For the extensive list of leasing principles, please click here.
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DISCLAIMER: The information contained in this article is general and is not intended to be advice on any matter. It is for information only and is not legal advice. In the event of a legal problem, you should seek legal advice.