On Friday 24 April 2020 the long awaited Retail and Other Commercial Leases (COVID-19) Regulation 2020 was published on the NSW Legislation website and commenced on that day.
The Regulation gives effect to the National Cabinet Mandatory Code of Conduct SME Commercial Leasing Principles During COVID-19 which was adopted by the National Cabinet on 7 April 2020.
The purpose of the Code is to impose a set of good faith leasing principles to apply to commercial tenancies (including retail, office and industrial) between landlords and tenants, where the tenant is a business with an annual turnover of up to $50 million and is an eligible for the Commonwealth Government's Jobkeeper scheme.
The main principles of the Code can be found in our other article here and the full Code can be found here.
What does the Regulation do?
The Regulation prevents a landlord from enforcing a number of rights it would normally have under its lease during the COVID-19 period of 6 months ending on 23 October 2020. That date may be extended.
Renegotiate rent
If requested by the tenant, landlords must renegotiate rent and other terms of those commercial leases in good faith having regard to the economic impacts of COVID-19 and the leasing principles set out in the Code.
Prohibitions
A landlord cannot not take any action during the 6 months period if the tenant doesn't pay rent, outgoings, or isn't open for business.
Rent cannot be increased during this period.
Other things a landlord cannot do
During this period a landlord cannot evict a tenant, re-enter the property, charge interest claim any bond monies or pursue a guarantor.
Disputes and Mediation
Any dispute between the landlord and tenant must go to mediation before proceedings can be commenced, and there is a requirement for the Registrar for Retail Tenancy Disputes or the Small Business Commissioner for commercial leases to certify in writing that mediation has failed to resolve the dispute.
Practical steps
If a tenant approaches a landlord and their lease falls within the Code, the parties must negotiate.
We have and are assisting a number of landlord and tenant clients in this negotiation and can help you through the process with legal and practical advice on how the Code impacts you.
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.
