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If you are a commercial or retail tenant that has been impacted by COVID-19, it is likely you need to know what your options are. While the federal government released the National Code of Conduct for Retail and Commercial Leasing and announced a moratorium (temporary prohibition) on evictions, there was still some confusion on how the Code would apply in each state. Further, states and territories have now legislated how the Code will apply. This article will outline what the relevant law regarding rent relief is in each state and how your business may be affected.

New South Wales (NSW)

NSW legislation applies to retail or commercial tenants who are ‘impacted lessees’. This includes businesses that: 

  • qualify for JobKeeper; and
  • whose turnover was less than $50 million for the 2018-2019 financial year.

Subsequently, if you are an impacted lessee, your landlord is prevented from taking a number of actions against you, including:

  • evicting you, re-entering the premises, terminating your lease or using the bank guarantee or security;
  • charging fees or interest on unpaid rent or outgoings; 
  • increasing the rent, except where the rent is based on turnover; or
  • passing on increases in land tax and other statutory charges. 

If you need to negotiate your rent with your landlord, you must enter negotiations in good faith with consideration for the principles of the Code. 

Note: these regulations were due to expire on the 24 October, 2020. However, they have been extended to 31 March 2020. This extension is split into two periods:

  1. 24 October, 2020 to 4 January, 2021: to be eligible under the regulations for this period, you needed to demonstrate that you were qualified for JobKeeper for the September quarter of 2021 and that your turnover was less than $50 million. 
  2. 4 January, 2021 to 31 March, 2021: to be eligible for this period, you need to establish that you qualified for JobKeeper from 4 January, 2021 and your turnover is less than $5 million. 

Victoria (VIC)

Victorian regulations apply to leases held by tenants who are: 

  • classified as small to medium entities (SME); and 
  • participating in the JobKeeper scheme.

To be eligible for rent relief under the regulations, you must first request it from the landlord. The request must be in writing and outline:

  1. a statement that your lease is an eligible lease;
  2. proof that you are a small to medium sized entity; and
  3. proof that you are eligible for and participating in the JobKeeper scheme. 

Even if you are the holder of an eligible lease, you still need to apply for relief. You will only be protected by the regulations and eligible for relief if you have applied.

Once your landlord receives the request, they have 14 days to respond with an offer for rent relief that mirrors the principles in the National Code. Once you receive your landlord’s offer, you can: 

  • accept the offer upfront; or
  • enter into negotiations with your landlord in good faith.

Much like NSW, the regulations prevent your landlord from:

  • evicting you, terminating your lease or using your bank guarantee or security; or
  • increasing the rent, except where the rent is based on turnover.

Note: these regulations were due to expire on the 28 September 2020. However, they have been extended to 28 March 2021. This extension is split into two periods:  

1. 29 September 2020 – 31 December 2020 

To be an eligible lease under the regulations during this period, you must have qualified for JobKeeper and have been classified as an SME entity. You also needed to supply your Landlord with specific documents, as outlined in period 2 below, when applying for relief.

Note: if you already negotiated relief with the Landlord prior to 29 September 2020 (and that relief was to continue beyond this date), but ceased to be eligible for JobKeeper after 29 September 2020, then you would still have been considered eligible.

2. For the period 1 January 2021 – 28 March 2021

Tenant’s seeking relief for this period must request relief from their Landlord as per the process and criteria outlined below. If you are seeking further relief, you also need to reapply to your Landlord. 

To apply to the Landlord for relief, you must provide the following documents:

  • a statement setting out SME status, JobKeeper participation and confirming that you hold an eligible lease;
  • a statement expressing your decline in turnover as a whole percentage calculated in line with the turnover test as set out in Rule 8 of the JobKeeper Rules;
  • an additional statement setting out your decline in turnover, including evidence such as Business Activity Statements, extracts from accounting records etc; and
  • the receipt number issued by the ATO and your most recent notice to the ATO under the JobKeeper rules.

Queensland (QLD)

Queensland has passed regulations that apply to affected leases. Affected leases are leases that retail shop tenants or small business tenants (including licence agreements) hold that: 

  • qualify for Jobkeeper; and
  • whose turnover was less than $50 million for the 2018-2019 financial year.

Therefore, if you hold an affected lease, it prevents your landlord from taking a number of actions against you, including:

  • evicting you, re-entering the premises, terminating your lease or using the bank guarantee or security;
  • charging fees or interest on unpaid rent or outgoings; or
  • increasing the rent, except where the rent is based on turnover. 

If you are seeking rent relief from your landlord, you must do so in writing. The landlord has 30 days to provide you an offer for rent relief that mirrors the principles in the National Code.

Note: these regulations were due to expire on the 29 September. However, they were extended to 31 December 2020. To be eligible during the extension period:

  • you needed to qualify for JobKeeper for the period of the 28 September 2020 – 1 January 2021; and
  • it was no longer mandatory for the landlord to offer at least 50% of the relief in the form of a waiver (ie. Landlords could offer you relief entirely in the form of a deferral or in any combination of a deferral or waiver).

If you agreed to start paying back deferred rent on the 1 October 2020, you will still be required to do so unless the landlord otherwise agrees. 

At this stage, no further extensions are expected.

South Australia (SA)

South Australia has passed regulations that apply to tenants suffering financial hardship. You will be considered to be suffering from financial hardship if you are eligible for and receiving JobKeeper payments.

Therefore, if you are suffering financial hardship, the landlord cannot take a number of actions against you, including:

  • evicting you, re-entering the premises, terminating your lease or using the bank guarantee or security; 
  • charging fees or interest on unpaid rent or outogins;
  • increasing the rent, except where the rent is based on turnover; or
  • passing on or requiring reimbursement for land tax.

The legislation does not prescribe how the landlord should provide or negotiate rent relief. You should continue negotiations with your landlord with the principles of the National Code in mind.

Note: the regulations were due to expire on 30 September, 2020. However, they were extended to 3 January, 2021. To remain eligible under the regulations you needed to demonstrate financial hardship and eligibility for JobKeeper during the period of 1 October 2020 – 3 January 2021.

At this stage, no further extensions are expected. 

Western Australia (WA) 

Western Australia has legislation and regulations that apply to eligible tenants of small commercial leases. Small commercial leases include: 

  • all retail leases under the Commercial Tenancy (Retail Shops) Agreements Act 1985; and
  • leases held by small businesses.

In order to be considered an eligible tenant, you must:

  • be eligible for JobKeeper; or 
  • at any time during the pandemic have satisfied the turnover test under the JobKeeper scheme ie. have experienced a 30% reduction in turnover. 

Further, if you are an eligible tenant it prevents the landlord from taking a number of actions against you, including:

  • evicting you, re-entering the premises, terminating your lease or using your bank guarantee or security;
  • charging fees or interest on unpaid rent or outgoings; or
  • increasing the rent, except where the rent is based on turnover.

If you are seeking rent relief from your landlord you must do so in writing and the landlord is required to provide an offer for rent relief that mirrors principles in the National Code. 

Note: these regulations were due to expire 29 September, 2020. However, they have been extended to the 28 March 2021. While the eligibility criteria has not changed, note that a new JobKeeper test was introduced on the 28 September 2020 and you will be required to satisfy this. 

Tasmania (TAS)

Tasmania’s regulations apply to businesses who are: 

  • eligible for or become eligible for the JobKeeper scheme; and 
  • are a small to medium sized entity. 

If you are an eligible person, it prevents the landlord from taking a number of actions against you, including:

  • evicting you, re-entering the premises, terminating your lease or using the bank guarantee or security;
  • charging fees or interest on unpaid rent or outgoings; or
  • increasing the rent, except where the rent is based on turnover. 

The legislation does not prescribe how the landlord should provide rent relief or negotiate it. You should continue negotiations with your landlord with the principles of the National Code in mind.

Note: the regulations were due to expire on 30 September, 2020. However, they were extended to 31 January 2021. To be eligible for this extension, you needed to satisfy a new JobKeeper test that was introduced on 28 September, 2020, in addition to the existing eligibility criteria. 

Australian Capital Territory (ACT) 

The ACT’s regulations apply to leases where: 

  • the tenant is carrying on a business or the Fair Trading (Code of Practice for Retail Tenancies) Regulations 1998 apply; and
  • the business is eligible for or becomes eligible for the JobKeeper scheme and is a small to medium size entity. 

Further, if you hold an eligible lease, it prevents the landlord from taking a number of actions against you, including: 

  • evicting you; 
  • re-entering the premises; 
  • terminating your lease; or 
  • using the bank guarantee or security.

Plus, the landlord must enter into negotiations with you regarding rent relief. 

Note: Originally these regulations were due to expire on the 28 September 2020. However, they were extended to 31 January, 2021. To be eligible for this extension, you needed to satisfy a new JobKeeper test that was introduced on 28 September, 2020, in addition to the existing eligibility criteria. 

Northern Territory (NT)

The Northern Territory regulation applies to business leases where: 

  • the tenant’s turnover is less than $50 million; and 
  • the tenant has experienced a decline in turnover of at least 30%

Unlike the other states and territories, there is no moratorium on evictions or requirements for the landlord to offer proportionate rent relief. 

However, under the regulations, landlords must enter into good faith negotiations for a period of at least 30 days before they can serve a notice to quit on the tenant. ie. the landlord must negotiate with you for at least 30 days before they can evict you. Note that Landlord’s cannot recover their legal costs from you for proceedings entered into during the emergency period. 

Further, during the emergency period, tenants who are on holding over will not be required to pay double the market rent.

Note: These regulations were due to expire on the 24 September 2020 and were extended to the 23 December 2020. There has been no announcement of further extensions. 

Key Takeaways

It is important to remember the above prohibitions will not apply to other breaches of the lease. Therefore, if you breach your lease for a reason unrelated to COVID-19, landlords can take action. Further, you are still bound by the terms of your lease. If you need assistance negotiating your lease due to COVID-19, get in touch with LegalVision’s COVID-19 legal team on 1300 544 755 or fill out the form on this page. 

What is the National Code of Conduct for Retail and Commercial Leasing?

The code was released by the federal government to help tenants who are struggling to pay rent due to COVID-19. Each state and territory has legislated how the Code will apply.

Who does the NSW legislation apply to?

The NSW legislation applies to ‘impacted lessees’ who are retail or commercial tenants. This includes businesses that qualify for JobKeeper and whose turnover was less than $50 million for the 2018-2019 financial year.

How long are the regulations in place for?

The regulations expire on different dates depending on your state or territory. Be sure to check the relevant dates and meet the requirements for an extension.

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