Update to the COVID-19 Lease Regulations

The NSW government has extended its “rent relief” lease regulations by introducing the Retail and Other Commercial Leases (COVID-19) Regulation 2022.

The additional two months of rent relief will help protect affected lessees until 13 March 2022. The regulations apply to commercial and retail leases, except for those entered into on or after 26 June 2021 (unless it was by way of a renewal/extension of an existing lease or an option to renew).

What you need to know

The lease regulations largely remain the same as the measures currently in place, which are set out below.

Impacted lessees are protected if they breach the lease between 13 July 2021 to 13 March 2022, such as by failing to pay rent or outgoings, or not trading during the hours specified in the lease.

If an impacted lessee breaches the lease in this period, the landlord is unable to take action such as eviction, re-entry, seizure of goods, termination or forfeiture of the lease or taking possession until the issue has been mediated with the Small Business Commissioner. Landlords also cannot increase an impacted lessee’s rent during this period.

Landlords and tenants must follow the principles in the “National Cabinet Mandatory Code of Conduct”. This means parties must negotiate rent relief in good faith. Rent relief should be proportional to the lessee’s reduction in turnover, with half of this amount to be waived and half to be deferred and repaid later.

Important new changes

From 30 November 2021, the test for an impacted lessee is:

1. The lessee would have qualified for a Micro-business COVID-19 Support Grant or the Job Saver Grant if they were still available; and

2. The turnover in the 2020-2021 financial year was less than $5 million.

Previously, an impacted lessee’s turnover needed to be less than $50 million. Impacted lessees need to give evidence to landlords proving that they meet these criteria.

Money received from the Micro-business COVID-19 Support Grant, a COVID-19 NSW Business Grant, and/or the Job Saver Grant are included in the lessee’s turnover.

Courts also now need to consider the “National Cabinet Mandatory Code of Conduct” when making decisions in lease disputes.

Contact us

If you have further questions about how these laws apply to your lease, contact us on 9589 6666 or write to Jonathon Prowse at jprowse@mcwlaw.com.au.