Commercial and Other Commercial Leases (COVID-19) Amending Regulation 2021 (NSW) – Real Estate and Construction

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Australia: Commercial Leases and Other Commercial Leases (COVID-19) Amending Regulation 2021 (NSW)

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In response to growing pressures on businesses due to the COVID-19 lockdown, New South Wales has reintroduced the COVID-19 rent relief program for retail and commercial tenants.

This new NSW regime works in essentially the same way as the first regime that was introduced in April 2020 with respect to commercial and commercial leases.

Victoria passed enabling legislation for another rent relief scheme for retail and commercial tenants. However, specific details on how this new regime will work will be set out in the Regulations, which have not been published. As of this update, no other state or territory has announced new rent relief provisions.

July 13, 2021 to January 13, 2022 is the Prescribed Period

The Regulation amending Regulation 2021 on commercial and other commercial leases (COVID-19) (NSW) (Regulation 2021) operates from July 13, 2021 to January 13, 2022, referred to as the “Prescribed Period”, under leases entered into before June 26, 2021.

Applicable to an Impacted Tenant

The by-law applies to an “affected tenant”, being a tenant who:

  • qualifies for one or more of the following grants: 2021 COVID-19 Micro-Business Grant, 2021 COVID-19 Business Grant and / or 2021 JobSaver Payment (each requiring a 30% drop in revenue); and
  • achieves sales of less than $ 50 million for fiscal year 2020/2021, including any online sales.
  • First-A lessor must not terminate a lease, call on a bank guarantee or take any other customary enforceable action during the Prescribed Period due to non-payment of rent or expenses or for not having opened during the hours negotiation of the lease (except in the case of a breach occurring before the prescribed period).
  • Second, the regulation requires that the rent be renegotiated taking into account the economic impacts of the COVID-19 pandemic and the rental principles of the National Cabinet’s Mandatory Code of Conduct – Principles for Commercial Leasing of SMEs during COVID-19 (Coded). The relevant requirement under the Code to grant the tenant rent relief commensurate with the decrease in the tenant’s turnover.

If the tenant is part of a group of companies, the group’s turnover is applicable. If the tenant is a franchisee, the turnover of the business realized in the premises concerned is the relevant turnover.

Key features

As in the case of Regulation 2020, this new Regulation 2021 has 2 essential characteristics, namely:

The landlord and tenant must begin negotiating rent relief in good faith within 14 days of the tenant’s request.

Rent exemption and deferral

A rent waiver must be granted for at least 50% of the total rent reduction, and a rent deferral applies to the balance. The rent deferral component is set out in the Code, which requires that the repayment of any rent deferred component be amortized over the remainder of the lease term or over a period of at least 24 months, whichever is greater. of them. This deferred payment scheme can only start after the end of the Prescribed Period, i.e. January 13, 2022.

News releases from the New Victorian Regime suggest that any current rent deferral payments resulting from the previous regime will be frozen at the tenant’s option until the end of the new regime (January 15, 2022), and added to any deferred rent under the new regime. This is not specifically addressed in the NSW Regulation and therefore the presumption is that existing deferral payments continue.

Comparison of turnover

Another aspect which is not absolutely clear is the applicable comparison period to assess the reduction in tenant turnover. In the case of the first device (introduced in 2020), the comparison was at a pre-pandemic period, since the tenant’s turnover was compared to the same month in 2019.

It is reasonable to take inspiration from the eligibility criteria for the 2021 JobSaver payment. A business is eligible for the JobSaver payment if, as of June 26, 2021, it has experienced a decrease in revenue of 30% or more over a period of 2 weeks compared to: (1) the same period in 2019; (2) the same period in 2020; or (3) the 2 week period immediately before the start of containment (June 12 to 25, 2021). There is some logic to comparing August 2021 with August 2020 or August 2019.

Disputes

The dispute resolution process of Part 8 of the Commercial Leases Act 1994 (NSW) applies to disputes regarding a relevant breach of a lease within the prescribed period, being non-payment of rent or expenses or not to open its doors during the hours required by the lease.

How can we help you?

Please call or email us if you have any questions or need assistance in applying this program.

To view our COVID-19 updates and publications or to make an online request, please click here.

Yours truly

Swaab’s real estate team

For more information please contact:

Mary Digiglio, Managing Partner
Telephone: +61 2 9777 8388
Email: [email protected]

Tony D’Agostino, partner
Telephone: +61 2 9233 5544
Email: [email protected]

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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