NSW is the first State or Territory to make legislation giving effect to the Mandatory Code of Conduct, with the Retail and Other Commercial Leases (COVID-19) Regulation 2020 taking effect on Friday 24 April 2020, and applying for six months until 24 October 2020.
Applicable period: 24/4/2020 – 24/10/2020
QUALIFIED TENANTS ENTITLED FOR PROTECTION:
- You signed the lease prior to 24/4/2020;
- You operate the retails shop, office or industrial premise
- You are experiencing at least 30% reduction in turnover;
- You qualifies for the JobKeeper Scheme;
- You had turnover for the 2018-2019 financial year less than $50 million.
- You must remain committed to the terms of the lease. Failure to abide by substantive terms of the lease will forfeit any protections provided to the tenant.
BENEFITS FOR TENANTS
1) RENT RELIEF
Landlord must offer tenants proportionate reductions in rent based upon the tenant’s reduction in trade for up to 100% of the amount ordinarily payable, on a case-by-case basis.
Example: if a qualifying tenant had experienced a 60% loss in trade due to the COVID-19 crisis, this should result in a 60% cash flow relief by landlord.
At least half of this relief would be provided as a rent waiver and the other half could be through a deferral payment of rent being recouped over at least 24 months negotiated between both parties.
Tenant does not need to make repayments until the end of the Covid-10 pandemic.
Landlord cannot charge any fees/interests on rent deferrals.
2) OPPORTUNITY TO EXTEND THE LEASE
Tenant should be provided with an opportunity to extend the lease for an equivalent period of the rent waiver or deferral period.
3) NO EVICTION BY LANDLORD
If the tenant does not pay rent, outgoings or keep the business open during the applicable period (24/4/2020 – 24/10/2020).
The landlord must not:
a. exercise a right of re-entry, take possession of the premises, terminate the lease or take any other similar action to evict the tenant;
b. seek an order for damages;
c. require interest to be paid on unpaid rent;
d. recover a security bond;
e. require a guarantor to perform the obligations of the tenant;
f. seek any other remedy available at law
4) NO RENT INCREASE
The landlord must not increase the rent (other than rent which is determined by reference to turnover) during 24/4/2020-24/10/2020.
5) PASSING LANDLORD BENEFITS TO TENANTS
Benefits that landlords get for their properties (e.g. reduced charges, land tax, deferred loan payments) should be passed on to the tenant (in the appropriate proportion).
6) WAIVE RECOVERY OF OUTGOINGS
Landlord should waive recovery of outgoings (utilities expenses) by a tenant during the period the tenant is not able to trade. Landlord can reduce services when required in such circumstances.
KEY THINGS TO REMEMBER:
- Negotiation in good faith
- Act in an “open, honest and transparent manner”.
- Provide each other with sufficient and accurate information (turnover figures, financial statements.
USEFUL LINK
JOB-KEEPER PAYMENT
NATIONAL CABINET MANDATORY CODE OF CONDUCT
RELIEF FOR COMMERCIAL TENANTS
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