Thinking | 5 May 2020
COVID-19 commercial leasing: status of rent relief laws around Australia
This information is correct as at 5 May 2020.
|Victoria||The COVID-19 Omnibus (Emergency Measures) Bill 2020 was passed on 23 April 2020 in Victoria. The legislation will come into operation on the day after it receives Royal Assent and will sunset in six months after commencement.
The legislation applies to commercial tenancies regulations were passed on Friday 1 May 2020 to give effect to the National Cabinet’s Mandatory Code of Conduct (Code).
The provisions only apply to an eligible lease that includes certain retail leases and non-retail commercial leases or licences.
The regulations mandate a process where the tenant must make a request for rent relief, including confirming that it is eligible under the regulations, and the landlord must respond with an offer that complies with the regulations. The offer must:
• Provide no less than 50% of the rent relief by way of waiver of rent (although the parties can otherwise agree in writing that this is not necessary).
• Apply to the relevant period, being 29 March 2020 to 29 September 2020.
• Take into account the reduction in the tenant’s turnover and whether a failure to provide sufficient rent relief might compromise a tenant’s ability to fulfil its obligations under the lease. Interestingly, the rent relief offered is not required to be directly proportional to the reduction in the tenant’s turnover.
• Take into account the landlord’s financial ability to offer rent relief.
The regulations also:
• Provide that eligible leases are amended to impose an obligation to cooperate and act reasonably and in good faith.
• Require the landlord to pass on reductions in outgoings.
• Prevent a landlord from evicting a tenant, having recourse to security or seeking to re-enter the premises for a breach which is the non-payment of rent or a reduction in operating hours.
• Provide that if the parties agree a deferral of rent, the landlord must offer the tenant an extension to the term for the equivalent period of the rent deferral, unless otherwise agreed.
• Prevents a landlord from requiring the tenant to pay interest or any other fee or charge in relation to the payment of rent deferred by variation.
In contrast to the Western Australian and South Australian legislation, there are no express provisions in the Victorian Bill which allow financially distressed tenants to terminate a lease early. However, we note that there has been lobbying to enable commercial tenants to terminate their lease early where they have limited prospects of reopening their business after the passing of COVID-19. Such provisions could be included through regulations.
Our detailed review of this legislation is available in our article Commercial leases and rent relief during COVID-19: the Victorian position.
|New South Wales||The COVID-19 Legislation Amendment (Emergency Measures) Bill 2020 was assented to on 25 March 2020 and includes an amendment to the Retail Trading Act 2008 regarding opening hours. The Residential Tenancies Amendment (COVID-19) Regulation 2020 was also made on 15 April 2020 and places a temporary moratorium on a landlord terminating a residential lease in certain circumstances.
NSW has also released the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW) which prohibits relevant landlords from taking certain actions, including terminating leases due to a failure to pay rent, outgoings or operate the business or increasing rent. Reductions in land tax and other statutory charges must be passed on to tenants.
The Regulations apply to tenants that qualify for JobKeeper, with a turnover of less than $50 million in 2018/19.
Our detailed review of this legislation is available in our article NSW enacts COVID-19 leasing regulations for commercial tenancies here.
|Queensland||On 23 April 2020, the Queensland Parliament passed the COVID-19 Emergency Response Act 2020. The Act is similar to the emergency powers passed in other states in that it enables regulations to be passed prescribing limits on landlords' and tenants' rights. The key difference is that the Act has been passed after the Code was issued and therefore includes specific provisions referencing Code principles.
The regulation-making power is broad, as it allows for regulations to be made under both the Act itself or the Retail Shop Leases Act 1994 (Qld) in relation to a ‘relevant lease’ in response to the COVID-19 emergency. Part 7 of the Act deals with retail and other prescribed leases (but not residential leases which are dealt with in Part 8). A relevant lease for the purpose of that Part is a retail shop lease under the Retail Shop Leases Act 1994 (Qld) or a ‘lease prescribed by regulation’.
The Act allows regulations to be made which:
• prohibit lessors from recovering possession of premises.
• prohibit lessors from terminating a lease.
• regulate or prevent the exercise or enforcement of another right of a lessor.
• exempt a lessee (or class of lessees) from the operation of a provision of an Act, lease or other agreement relating to the premises.
• require parties to have regard to principles or a code in negotiating or disputing matters.
• require mediators to have regard to principles or a code when mediating.
• provide for a dispute resolution process.
• prescribe other matters necessary to facilitate the above.
• provide for a maximum penalty of 20 penalty units for a breach of the regulation.
Regulations are yet to be released.
|South Australia||The COVID-19 Emergency Response Bill 2020 was assented to on 9 April 2020. Section 7 applies to commercial leases and section 8 applies to residential tenancies. The COVID-19 Emergency Response (Commercial Leases) Regulations 2020 were also made on 16 April 2020.
Section 7 of the Act contains provisions preventing a lessor from taking a prescribed action in relation to a commercial lease during the prescribed period.
Prescribed actions include eviction, repossession, termination, seizure of goods, charging interest on overdue rent or calling on security.
Further, if a tenant is in financial hardship as a result of COVID-19, the landlord can’t increase rent or require a tenant to reimburse it for land tax.
|Western Australia||The Commercial Tenancies (COVID-19 Response) Bill 2020 and Commercial Tenancies (COVID-19 Response (Early Termination)) Bill 2020 have recently been proposed in Western Australia. The legislation aims to put into effect the National Cabinet’s mandatory Code of Conduct released on 7 April 2020.
The response prevents a landlord from taking a prohibited action in relation to a small commercial lease tenant during the emergency period on the grounds of the failure of a small commercial lease tenant to pay lease or remain open during the emergency period, which includes eviction, termination or exercising any other remedy. The legislation also restricts rental increases during the emergency period. This restriction is not included in the mandatory Code of Conduct.
Small commercial lease tenants are also able to terminate their leases if they can establish that they are in severe financial distress.
|Tasmania||On 9 April 2020, the Tasmanian Premier issued a notice under section 22 of the COVID-19 Disease (Emergency Provisions) Act 2020 which provided for:
• an immediate halt to terminations for unpaid rent or other money; and
• immediate suspension of rental increases for commercial tenants.
These restrictions apply to commercial tenants with turnover of less than $50 million who are eligible for the JobKeeper program.
The Tasmanian Government has also announced that it will introduce legislation to give effect to the National Cabinet Mandatory Code of Conduct.
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