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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.

 

Which tenants are protected under the current Regulations?

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:

  1. qual­i­fied for one of the three NSW COVID-19 busi­ness grants; or
  2. would have qual­i­fied had they not received a Com­mon­wealth COVID-19 Dis­as­ter Pay­ment.

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.

 

How much rent are landlords required to reduce?

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):

  1. 2021 COVID-19 Micro-busi­ness Grant; and/or
  2. 2021 Job­Saver Pay­ment.

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.

 

Are grants calculated as part of a tenant’s turnover?

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.

 

If a tenant fails to pay rent, can a landlord enforce its rights?

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.

 

What if a tenant does not cooperate?

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.

 

Can a landlord increase rent under the Lease?

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.

 

 

If you require assistance with renegotiating rent or enforcing your rights, please reach out to the property and commercial law team at Donovan Oates Hannaford. 

 

 

For Further Information Please Contact

Sarah Mehlert

Position: Lawyer

Direct Phone: (02) 6583 0438

Email: smehlert@dohlaw.com.au

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