Trade and tourism are slowly recovering after the lockdowns of 2021, but commercial tenants are still feeling the impact of COVID-19 due to the recent outbreak of the Omicron variant.
To assist still-struggling businesses, on 17 January 2022 the government extended the protection for commercial tenants until 13 March 2022. This means tenants are still entitled to renegotiate rent and landlords must continue to attempt mediation before enforcing their rights.
If you missed our previous article outlining the restrictions on landlord’s rights, you can read it here.
There has been a slight change to the tenants protected by the Regulations to align with the changed government grant situation. The current regulations are the Retail and Other Commercial Leases (COVID-19) Regulation 2022 and Schedule 5 of the Conveyancing (General) Regulation 2018 (Regulations).
Under the current Regulations a tenant is protected, if at any time between 13 July 2021 and 13 March 2022 (Prescribed Period) they either:
If a tenant falls into this protected category, even once during those eight months, they are entitled to request a renegotiation of rent, and a landlord cannot enforce payment of outstanding rent without first attempting mediation.
While tenants may request a rent renegotiation, they may not be entitled to reduced rent for the entire Prescribed Period.
Under the Regulations, when a tenant no longer qualifies for a COVID-19 grant, they are no longer entitled to a rent reduction. The previously available grants, which carried with them the right to receive a rent reduction, have now ended.
However, the amended Regulations extend the right to a rent reduction for some smaller tenants, whose turnover is less than $5 million. Such tenants are entitled to reduced rent for periods of time when they would have qualified for the following grants (if they were still available):
All other tenants are only entitled to a rent reduction for the period they actually received government grants. After receiving their last grant, they must return to paying full rent, unless otherwise agreed with the landlord.
If you are a commercial landlord or tenant who needs to renegotiate rent, download our guide. Our guide sets out the commercial leasing principles in the National Cabinet Mandatory Code of Conduct, which should be considered in renegotiations, in addition to the economic impacts of COVID-19. We have experience assisting clients with rent renegotiations and can act on your behalf.
Yes, grants are included in turnover. This is another change effected by the new Regulation.
When renegotiating rent with a landlord, tenants must disclose the grants they received as part of their turnover or trade. This disclosure assists a landlord in renegotiation by providing a complete view of the tenant’s financial situation.
The answer is still: yes, if the tenant is protected by the Regulation and the landlord has attempted mediation, a landlord can enforce its rights.
Please see our previous article for details on the mediation process.
Provided that the Prescribed Period is not extended again, rent due from 14 March 2022 can be enforced without the prerequisite of mediation. However, the Regulation may still require mediation before enforcing rent due prior to 14 March 2022.
A landlord need only renegotiate rent if a tenant cooperates.
This means a tenant must request that the landlord renegotiate rent. Such a request must be made during the Prescribed Period. Tenants may make a second request, if rent has already been renegotiated once, as long as the same rent is not being renegotiated.
When making a request, tenants must also provide the lessor with a statement saying they are an impacted lessee for the purposes of the Regulation, supported by evidence. In other words, they must prove that their financial situation qualified or would have qualified them for one of the previous government COVID-19 grants.
If the tenant does not provide this information, the landlord need not renegotiate rent.
No, until 14 March 2022 rent cannot be increased unless the rent is based on turnover.
The Regulations have already been extended a few times, so this date may be pushed out depending on the government’s response to the economic situation at that time.