Australia: COVID-19 and NSW government restrictions - Update

With the impact of NSW Government restrictions on movement and business closures continuing to evolve due to the spread of Covid-19, we have set up a portal for business owners to be able to get the latest guidance on legal issues that will arise over the coming weeks.

BUSINESS CONTRACTS

Force Majeure

Business contracts may include a force majeure clause that covers events outside the control of the parties, and which may entitle the parties to delay, suspend or terminate the contract. There is no standard wording for a force majeure clause. Not all contracts include such a clause, nor do all force majeure clauses include Covid-19 circumstances. The specific terms of any force majeure clause will need to be considered to determine whether Covid-19 circumstances such as pandemic, border closures or Government orders are included and may be relied on.

Frustration

If there is no force majeure clause or other provision but a contract has been affected by the pandemic, it may be a frustrated contract. A frustrated contract occurs when an event outside the control of the parties has arisen which results in the contractual obligations being impossible to perform. However, delay in the ability to perform your obligations under a contract will not amount to frustration unless the delay radically alters performance of the contract.

Risks

There are significant risks in relying on force majeure or frustration in terminating a contract. Each case will depend on the terms of the contract and the specific circumstances. You should consider whether contracts may be renegotiated and seek advice before taking any steps to terminate a contract.

LANDLORDS & TENANTS

Business

The State Government has introduced new regulations dealing with business landlords and tenants.

Briefly, a landlord cannot enforce certain rights under their premises lease between 13 July and 20 August 2021 for non payment of moneys due under the lease or for not opening for business. The prescribed action that cannot be taken by a landlord includes charging interest, claiming on any lease security or evicting a tenant.

The regulations apply to retail and certain commercial leases of which tenants can substantiate they are entitled to a government support Grant and their turnover in 2021 financial year was less than $50m. There is no protection for tenants as regards deferred or waived rent during this period. It would appear that rent (and other charges) unpaid, will simply be deferred until after 20 August 2021. Landlords may still enforce rights for grounds that arose before 13 July 2021 eg removing a tenant following expiry of the lease term or terminating for damaging the premises.

Residential

The State Government has introduced a 60 day freeze on evictions for residential tenants. This operates from 14 July to 11 September 2021.

Tenants are encouraged to pay as much of their rent as they can afford during this period as once the freeze ends, the landlord will be entitled to claim any unpaid rental during the freeze period. Tenants seeking to be eligible for protection against eviction need to show they have been impacted by the Covid-19 lock down and have at least a 25% reduction in that income. Tenants must continue to pay at least 25% of the rent payable. Landlords and tenants are encouraged to work together during this freeze period and come up with workable arrangements for repayment of arrears following the freeze period without the need to commence eviction proceedings.

Landlords can claim up to $1500 under a support grant. Alternatively, the landlord can claim the Covid-19 land tax benefit (but not both support measures).

CONSTRUCTION INDUSTRY - 2 WEEK SHUT DOWN

As a result of the amended Public Health (Covid-19 Temporary Movement and Gathering Restrictions) Order 2021 (the Orders), the NSW Government has ordered a halt to all Construction works, both residential and commercial, save for the following exemptions as provided under clause 24AB of the Orders:

(1) any works relative to the safety or security of the Construction Site;

(2) any works to deal with environmental risks;

(3) any works to maintain and ensure the integrity of critical plant, equipment or assets, including partially completed works, that would otherwise deteriorate;

(4) any works to receive deliveries of supplies that would otherwise deteriorate;

(5) any works to maintain public utilities;

(6) any works ensure the safe operation of existing transport infrastructure;

(7) any works by or on behalf of NSW Health in response to the Covid-19 pandemic; and

(8) any works because of an emergency.

If you are performing works on a 'construction site' and they do not fall within the above exemptions, you should not be performing the works.

If you are considering whether the works you need to perform are 'emergency works', you should ask yourself: Do these works need to be performed now or can they wait 2 weeks? If your answer is yes, you should not be performing the works unless they fall under any of the other 'exemptions'.

If you have a project timetable or works program to adhere to, that reason alone is not a reason for those works to be considered 'emergency' works under the Orders.

Managing the Delay under the Contract

If you are a head contractor or sub-contractor, you should review your contracts and consider the provisions relating to extensions of time, delay, legislative provisions, suspension, Covid-19 and variations. While each contract rests on its own merits, the contract provisions will assist you in determining that next step and ensure that you are aware of your rights and obligations during these difficult times.

If you are a homeowner and are unsure of what the above means, check your contract and talk to your contractor.

We note that it important that through this time period you keep up communication with the parties to the construction contract or agreement to ensure that everybody is aware of their rights and obligations.

Please keep an eye out for further updates as they become available.

EMPLOYERS & WORKERS

Effective 18 July 2021, the New South Wales Government has tightened stay at home orders in place across the Greater Sydney area (including the Blue Mountains, Central Coast, Wollongong and Shellharbour). View restrictions here.

Mandatory workplace Covid-19 vaccinations, Michael Byrnes discusses the issue with Brooke Corte on the Money News program on 2GB, 3AW and 4BC on 5 July 2021. Click to listen to the podcast click here.

We understand that many of you are struggling at the moment and are mindful of the legal challenges you are facing. If you have any legal questions or issues that require assistance please complete the form below and we will respond to your enquiry as a matter of urgency.

Our lawyers and partners are available to talk to you at any time.

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.