On 24 April 2020, the Western Australian Parliament passed the Commercial Tenancies (COVID-19 Response) Act 2020 (WA) (the Act). The Act modifies Western Australian law in respect of commercial leases to assist tenants suffering financial distress as a result of the current economic downturn due to the COVID-19 pandemic.
Application of the Act
The Act applies to small commercial leases which include:
- retail shop leases as defined in section 3(1) of the Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA);
- leases where the tenant owns or operates a small business and uses the leased premises for carrying on that business;
- leases where the tenant is an incorporated association; and
- any other lease that may be prescribed by the regulations in the future.
Landlords and tenants cannot contract out of the Act and any waiver of a right, remedy or benefit conferred on a party under the Act is of no effect.
Effect of the Act
The Act prevents a landlord from increasing the rent during the emergency period.
The Act also prevents a landlord from taking prohibited actions against a tenant during the emergency period on the grounds of a breach, if the breach consists of:
- the tenant's failure to pay rent or any other amount of money payable;
- the land or premises, or the business carried on there, is not open for business at the times specified in the lease;
- any act or omission of the tenant that is required under a written law in response to the COVID-19 pandemic; or
- any act or omission that is prescribed by the regulations in the future.
Prohibited actions include eviction, re-entry, possession, recovery of land, seizure of goods, forfeiture, termination of the lease, damages, requiring payment of interest on unpaid rent or other money payable, seeking recovery of security, enforcing guarantees, and any other remedy otherwise available at law.
The emergency period is defined as beginning on 30 March 2020 and ending on the day prescribed by the regulations in the future. If the regulations do not prescribe an end date before 29 September 2020, then the emergency period ends on 29 September 2020.
The emergency period has been backdated to capture actions taken since the emergency period began but before the Act was introduced. The Act provides that any prohibited action, measure that is contrary to the Act or rent increase taken or commenced since the start of the emergency period against a tenant, be suspended or stayed.
The Act allows for a dispute resolution process in the event landlords and tenants cannot resolve a dispute. A party to the dispute may apply to the State Administrative Tribunal (the Tribunal) to determine the dispute during the emergency period. In making its decision, the Tribunal must have regard to the financial impact of the COVID-19 pandemic on the tenant's business and its capacity to meet its lease obligations, the landlord's financial capacity (if relevant), and the principles of proportionality and fairness. Instead of applying to the Tribunal, a tenant operating a small business may request the Small Business Commissioner to provide assistance or use alternative dispute resolution mechanisms under the Small Business Development Corporation Act 1983 (WA).
Code of Conduct
The Act provides that the soon-to-be legislated regulations will adopt a Western Australian code of conduct governing commercial leasing principles during the COVID-19 pandemic. The WA code of conduct will be based on the National Cabinet Code of Conduct and provide a framework for negotiations to be carried out in good faith.
Co Author by: Louise Dinnie (Law Graduate)
Originally published by Johnson, Winter & Slattery, April 2020
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.