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Details released: Retail and Other Commercial Leases (COVID-19) Regulation 2021

by Chris Drayton and Celine Truong
16 July 2021
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On 14 July 2021, the NSW Government enacted the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (Regulation) following the announcements of the 2021 COVID-19 NSW Support Package for retail and commercial tenants and landlords.

The Regulation provides clarity on who is an impacted lessee and the prescribed period in which the prohibition on lockouts and evictions on impacted lessees applies (without having first attempted mediation). We note retail and commercial leases are treated in the same manner. The Regulation is summarised as follows:

  • Landlords must not take Prescribed Action against an Impacted Lessee on the grounds of a Prescribed Breach of an Impacted Lease occurring during the Prescribed Period unless the matter has been referred for mediation; and the registrar has certified in writing that mediation has failed to resolve the dispute. 
     
  • The “Prescribed Period” means 14 July 2021 to 20 August 2021.
     
  • Firstly the lease must be a “Commercial Lease” meaning any agreement relating to leasing of premises (commercial or retail) but does not include a lease entered into on or after 26 June 2021 unless the lease was entered into by means of an option to extend or renew on the same terms as the existing lease. 
     
  • Secondly, the tenant must be an “Impacted Lessee” and must satisfy two tests:
    • The lessee qualified for one or more of the following grants: Micro-business COVID019 Support Grant, COVID019 NSW Business Grant or Job Saver Grant; and
    • The turnover in 2020-2021 financial year was less than $50 million (noting further assessment required for corporations that are a member of a group or franchisees).
    • Evidence must also be provided to the Landlord to show a lessee is an Impacted Lessee including a statement from the lessee given within a reasonable time after it is requested by the Landlord. 
       
  • The Landlord cannot take a “Prescribed Action” meaning taking action under the commercial lease or seeking orders or proceedings for any of the following: eviction of the lessee, exercising right of re-entry, recovery of the premises, distraint of goods, forfeiture, damages, payment of interest relating to unpaid rent, recovery of security bond or guarantee, possession, termination and any other remedy available to the Lessor against the lessee at common law.
     
  • Prescribed Breach” of an impacted lease means failure to pay rent or outgoings or the business not being open for business during the hours specified in the lease. 

Finally we note there is no amendment to the 2020 legislation, and therefore no regulatory obligation for Landlords to provide rent relief for the Prescribed Period under the Regulations. However note that Landlords will benefit in a land tax concession equivalent to the rent relief provided (although this is not captured as part of the Regulations).