The NSW Government has reintroduced protections for commercial tenants under the Retail and Other Commercial Leases (COVID-19) Regulation 2021. The regulation came into effect on 13 August 2021, and applies to commercial leases impacted by COVID-19. This article provides a summary of the Regulations to inform your commercial lease negotiations.
Am I covered by the commercial lease regulations?
The Regulations cover ‘impacted lessees’. An impacted lessee is a business with under $50 million in turnover for the 2020-21 financial year which
- entered their lease before 26 June 2021;
- qualifies for one or more of the 2021 COVID-19 business grants or payments; and
- is not a tenant of an agricultural lease.
A 2021 COVID-19 business grant or payment is one of the following:
- the COVID-19 Micro-business Grant;
- the COVID-19 Business Grant; or
- the JobSaver Payment.
How do the commercial lease regulations help tenants?
The Regulations prevent landlords from taking a ‘prescribed action’ against impacted lessees (tenants) who have committed a ‘prescribed breach’ between 13 July 2021 and 13 January 2022 unless:
- the landlord has complied with any request by the tenant to renegotiate the commercial lease; and
- following any negotiation, the matter has been referred for mediation, and the Registrar of Retail Tenancy Disputes has certified in writing that mediation has not resolved the dispute.
Landlords can still take a ‘prescribed action’ against a tenant for any grounds unrelated to the economic impacts of COVID-19.
What is a ‘prescribed breach’ by a commercial tenant?
A prescribed breach of an impacted lease is a:
- failure to pay rent;
- failure to pay outgoings; or a
- failure to open for business during the hours specified in the lease.
What is a ‘prescribed action’ by a commercial landlord?
A prescribed action in relation to a commercial lease includes:
- evicting the tenant;
- exercising a right of re-entry to the premises or land;
- termination of the commercial lease;
- interest payments on or fees related to unpaid rent owed by the tenant;
- recovering all or part of a security bond under the commercial lease;
- recovery of the premises or land;
- distraint of goods;
- the tenant performing obligations pursuant to a guarantee under the commercial lease;
- possession; or
- any other remedy otherwise available to a landlord against a tenant under common law or statute.
What should I do next?
Parties to impacted commercial leases should seek to enter lease negotiations, especially if a tenant has committed a prescribed breach. Commercial landlords and tenants may wish to obtain professional legal advice to inform their lease negotiations and ensure compliance with the Regulations.