NSW Update | COVID-19: Extension of Commercial Tenancies
We released an article on 22 October 2020 regarding extensions of COVID-19 leasing related legislation in each state and territory (click here to read the article).
We now summarise in further detail the effect of the Retail and Other Commercial Leases (COVID-19) Regulation (No 2) 2020 (“Second NSW COVID Regulation”):
- The prescribed period is extended to 31 December 2020.
- Some of the uncertainties contained in the NSW COVID Regulation, in particular whether certain clauses are intended to apply only to "impacted lessees" or to commercial and retail leases in general have been clarified.
- The Second NSW COVID Regulation applies to the exercise or enforcement of rights under an “impacted lease” (rather than under a commercial lease generally) in relation to circumstances occurring during the prescribed period. An impacted lease is defined as a commercial lease to which an impacted lessee is a party.
- The Second NSW COVID Regulation only applies to leases entered into before 24 April 2020, and not to new leases. We note ‘new leases’ excludes option leases and any other extension or renewal of an existing lease on the same terms as the existing lease.
- Tenants are required to 'retest' and qualify under JobKeeper 2.0 to remain eligible for rent relief as an “impacted lessee” under the Second NSW COVID Regulation. Turnover continues to include internet sales.
- Landlords cannot terminate an impacted lease if tenants fail to pay rent or fail to trade as required under the lease during the prescribed period.
- The rent payable under an impacted lease cannot be increased during the prescribed period (other than rent or a component of rent determined by reference to turnover).
- As per our earlier article, renegotiation is limited to periods for which relief has not already been provided. Therefore, a tenant may make a second or subsequent request to renegotiate rent however such a request may not relate to rent for a period for which rent has already been reduced, waived or deferred following a renegotiation.
- In the event renegotiations fail, Courts and tribunals are not able to impose agreements on parties. However, if impacted lessees do not properly participate in negotiations and comply with the requirements set out in the Second NSW COVID Regulation, landlords can take ‘prescribed actions’, such as terminating a lease or drawing on a bank guarantee.