Relief for commercial tenants in NSW – a practical review of the new 2021 COVID-19 Regulation

On 14 July 2021, new regulations were enacted to provide relief for tenants affected by the latest round of COVID-19 related lockdowns in New Sout Wale. 

For a full review of the Retail and Other Commercial Leases (COVID-19) Regulation 2021, (the Regulations), find out more here.  However, for an easily digestible high level summary of the important points, see below.  

•    The Regulations do not apply to any lease entered into after 26 June 2021, except for option leases, or any other extension or renewal of a lease on the same terms; 

 •    A Landlord cannot take any ‘prescribed action’ (which are generally familiar from the previous 2020 Regulations on the same topic, and include termination, re-entry, calling on security or a guarantee, charging interest on unpaid rent, or enforcing any other right at law the landlord would otherwise be entitled to) for ‘prescribed breaches’ (failure to pay rent, outgoings, or failure to open the tenant’s business as required under the lease).  The restriction on the landlord being able to exercise these prescribed actions remains in place:

o    until a process of mediation with the Small Business Commissioner has been exhausted (as evidenced by a certification issued by the mediator); or

o    for a period of 6 months from 14 July 2021 (being the ‘prescribed period’).

 •    There is a requirement for tenants to provide evidence that they are in fact an ‘impacted lessee’, which similarly to the 2020 Regulations requires the tenant to:

o    qualify for one or more of the 3 government grants available (being the Micro-Business COVID-19 Support Grant, the COVD-19 NSW Business Grant, or Job Saver Grant; and

o    satisfy the previously established rule of having turnover less than $50m (including group turnover, for corporations that are part of a group). 

•    The onus is on tenants to provide evidence to their landlord that they qualify for relief before a tenant can rely on the protections under the Regulations.  Further, the tenant must give that information ‘within a reasonable time’ after it is requested by the landlord.  However, if the tenant does not provide the information as requested, the Regulations do not specifically state that the landlord may then take any ‘prescribed action’ – but if the tenant cannot prove it is an ‘impacted lessee’ then it is likely that the Regulations will not apply to a tenant – as the tenant would have not satisfied the requirement of being able to provide the requisite evidence (however (but of course an element of reasonableness should be exercised when making this determination and a landlord’s action should be determined on a case by case basis).

•    Nothing in the Regulations affect the landlord’s rights in being able to take action for breaches occurring before the commencement of the Regulations – or for anything non-pandemic related (for example, subletting/licencing without consent).

 •    There is no mandated rent relief/waiver/deferral required – however there is a land tax reduction available to landlords through the Office of State Revenue for the lesser amount of:

o    The amount of rent reduction given (to an eligible tenant); and

o    100% of the land tax liability attributable to the parcel of land leased to such eligible tenant.

 As applications for this land tax concession are not open yet, it may be unlikely for landlords to offer rent concessions until the land tax reduction scheme is clearer.

We will continue to monitor the situation and provide further updates as necessary.

Keighran Legal + Advisory Website

The above is for general information only and is not intended to provide legal advice. Please contact Keighran Legal + Advisory to discuss your specific situation.