Thinking | 27 October 2020

NSW Government releases extended COVID-19 commercial tenancy regulation

By Kitty Vo, Maurice Doria and Charlotte Reed

The new Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (New COVID Regulation) came into effect on 24 October 2020. This extends the current framework for commercial landlords and tenants in NSW to negotiate rent relief deals for leases entered into before 24 April 2020, as a result of the COVID-19 pandemic.

As foreshadowed in our last update, the new COVID Regulation replaces the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (COVID Regulation) which expired on 23 October 2020 and has extended the ‘prescribed period’ until 31 December 2020.

Eligibility for relief under the New COVID Regulation has been updated to include businesses who are eligible for JobKeeper under the amended JobKeeper regime in the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020.

The New COVID Regulation continues to give effect to Federal Government’s National Mandatory Code of Conduct for commercial tenancies by extending the COVID Regulation which commenced on 24 April 2020, including:

  • prohibiting termination or eviction for failure to pay rent;
  • prohibiting termination or eviction for tenants not operating businesses during the hours specified in a lease; and
  • prohibiting an increase in rent during the prescribed period.

However, the extension does not mean that current rent relief arrangements obtained under the COVID Regulation will be automatically extended. In order to obtain further rent relief until 31 December 2020, eligible tenants must approach their landlords to re-establish their eligibility for rent relief. Eligible tenants may make requests to renegotiate rent, provided that the negotiation does not relate to a period where rent has already been reduced, waived or deferred.

Further, the New COVID Regulation now provides a time frame in which landlords must respond to rent relief requests. Landlords must commence good faith negotiations within 14 days of receiving a renegotiation request from tenants, unless otherwise agreed between the parties.

The NSW Government has also announced a new land tax relief package. Eligible commercial landlords can apply for a land tax concession of up to 50% of the 2020 year if they pass savings on to their tenants in the form of a rent reduction.

As noted above, a ‘commercial lease’ for the purposes of the New COVID Regulation does not include a lease entered into on or after 24 April 2020 (unless the lease was entered into as a result of an option to extend or renew the lease, or an extension or renewal of an existing lease on the same terms as the existing lease).

This means that if a tenant negotiates a brand new lease with its landlord after 24 April 2020, the tenant will not be able to rely on the protection of the New COVID Regulation – any rent relief negotiations will need to be included as part of the new lease negotiations.

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