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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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