The Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (New Regulations) came into effect on 24 October 2020, extending the rent relief framework for retail and commercial leases until 31 December 2020 (prescribed period) - see our earlier article.
The New Regulations continue to give effect to the National Cabinet Mandatory Code of Conduct for rent relief negotiations which was adopted by the National Cabinet on 7 April 2020 (Code).
So who does this apply to?
The New Regulations only apply to leases entered into prior to 24 April 2020, and options to renew those leases.
It is therefore imperative that landlords and tenants entering into a new lease after 24 April 2020 consider and negotiate terms that are suitable to the uncertain economic climate as a result of the COVID-19 pandemic.
What does it mean for current rent relief arrangements obtained under the previous regulation?
The extension does not mean that rent relief arrangements negotiated under the previous regulations will be automatically extended.
Tenants must approach their landlord to re-establish their eligibility for rent relief until 31 December 2020. To do so, a tenant must provide to the landlord:
- a statement to the effect that the tenant is an 'impacted lessee'; and
- evidence that the tenant is an 'impacted lessee'.
An 'impacted lessee' is defined as a tenant:
- who qualifies for the JobKeeper scheme (including the amended JobKeeper scheme pursuant to the Commonwealth by the Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 8) 2020); and
- whose turnover for the 2018 - 2019 financial year must be less than $50 million.
whose turnover for the 2018 - 2019 financial year must be less than $50 million.
Upon receiving a request for rent relief, a landlord must commence good faith negotiations within 14 days, unless otherwise agreed between the parties. The New Regulations allow for tenants to renegotiate rent relief, but not for any period for which rent has already been reduced, waived or deferred.
If a tenant fails to provide the landlord with the required statement and evidence, the landlord is regarded as having fulfilled its obligations to negotiate in good faith and may take "prescribed action" against the tenant for failure to pay rent.
"Prescribed action" includes eviction, claiming damages, requiring payment of interest or calling on a bank guarantee or security deposit.
If the Regulations apply, a landlord is prohibited from taking "prescribed action" during the prescribed period against a tenant for failure to pay rent.
The Regulations do not prohibit a landlord from taking "prescribed action" against a tenant for a breach which is not related to the non-payment of rent or outgoings.
If the parties reach an agreement, it is important that the terms of the agreement are documented to reduce uncertainty and future enforceability issues.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.