Many com­mer­cial ten­ants have had their income reduced as a result of the decreased trade and tourism due to the lock­downs that com­menced in June 2021. They are now strug­gling to pay their required rent.

On 13 August 2021 the gov­ern­ment rein­tro­duced the 2020 Reg­u­la­tions that require land­lords to rene­go­ti­ate rent for com­mer­cial leas­es impact­ed by COVID-19.

If your ten­ant or your busi­ness needs to rene­go­ti­ate rent, down­load our guide, which sets out the com­mer­cial leas­ing prin­ci­ples in the Nation­al Cab­i­net Manda­to­ry Code of Con­duct. We have expe­ri­ence assist­ing clients with rent rene­go­ti­a­tions and can act on your behalf.

To sub­sidise reduced rent, the gov­ern­ment is offer­ing grants and land tax relief to eli­gi­ble land­lords. Grants and pay­ments are also avail­able to com­mer­cial ten­ants to assist with rental pay­ments.

 

If a tenant is still unable to pay the renegotiated rent, can a landlord enforce its rights?

The answer is yes, sub­ject to one hur­dle: they must first attempt medi­a­tion.

The recent­ly intro­duced Retail and Oth­er Com­mer­cial Leas­es (COVID-19) Reg­u­la­tion 2021 and Sched­ule 5 of the Con­veyanc­ing (Gen­er­al) Reg­u­la­tion 2018 (the Reg­u­la­tions) restricts land­lords from tak­ing action to enforce their rights against cer­tain ten­ants for fail­ure to pay rent, unless they first attempt medi­a­tion.

 

So which tenants are protected?

Ten­ants of retail and oth­er com­mer­cial leas­es are pro­tect­ed by the Reg­u­la­tions if they:

  • Qual­i­fy for the 2021 COVID-19 Micro-busi­ness Grant, 2021 COVID-19 Busi­ness Grant and/or the Job­Saver Pay­ment; and
  • Have a 2020–2021 turnover of less than $50 mil­lion.

How­ev­er, this does not apply to new leas­es entered on or after 26 June 2021 which are not exten­sions or renewals on the same terms.

 

How long does this protection last?

Affect­ed ten­ants are pro­tect­ed dur­ing the pre­scribed peri­od in accor­dance with the Reg­u­la­tions from 13 July 2021 to 13 Jan­u­ary 2022. This time­frame was extend­ed from the orig­i­nal 20 August 2021 end date and may be extend­ed again as we saw in 2020, if lock­downs per­sist.

Dur­ing this time­frame, land­lords are not allowed to increase their rent.

 

What are a landlord’s options in this situation?

First, a land­lord may request a state­ment and sup­port­ing evi­dence from a ten­ant that indi­cate the ten­ant is sub­ject to the Reg­u­la­tions. A ten­ant must pro­vide this infor­ma­tion with­in a rea­son­able time after such a request.

If a ten­ant can show that it is pro­tect­ed, a land­lord can either:

  • Wait until 12 Jan­u­ary 2022 to take action in rela­tion to unpaid rent; or
  • Imme­di­ate­ly attempt medi­a­tion in rela­tion to unpaid rent to date;

Keep­ing in mind that the above time peri­od may be extend­ed, land­lords may pre­fer to attempt medi­a­tion in the hope of obtain­ing pay­ment soon­er.

 

How does mediation work?

Either par­ty can apply for medi­a­tion to the NSW Small Busi­ness Com­mis­sion­er. A medi­a­tor is assigned by the Com­mis­sion­er and medi­a­tion will be organ­ised with­in 3–4 weeks after sub­mit­ting such an appli­ca­tion.

No appli­ca­tion fee is payable, but the cost of the medi­a­tor will be shared by the par­ties (approx­i­mate­ly $152/hour includ­ing GST).

Depend­ing on the loca­tion of the par­ties and the COVID-19 restric­tions in place, medi­a­tion can take place in per­son or via a video/telephone con­fer­ence.

 

What if mediation is unsuccessful?

If the dis­pute is not resolved by medi­a­tion, the medi­a­tor will pro­vide a cer­tifi­cate to that effect.

With that cer­tifi­cate, the land­lord is free to enforce its rights under the lease, whether that be ter­mi­nat­ing the lease and tak­ing pos­ses­sion of the premis­es, recov­er­ing the bond, pur­su­ing the guar­an­tor, or suing for the out­stand­ing rent includ­ing inter­est.

 

If you require assistance with renegotiating rent or chasing unpaid rent, please reach out to the commercial law team at Donovan Oates Hannaford.

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