Dragon Head shoes

COVID-19 Property Leasing Legislation in Action

Luke Mitchell ||

Assisted by Francesca Zappia 

The repercussions of the COVID-19 pandemic have been detrimental to both lessors and lessees throughout the retail and commercial leasing sectors. In March 2020, the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW) was enforced. Schedule 2 of the Act was introduced to include additional clauses into current legislation to make it ‘COVID-friendly’, as seen through the amended clauses in the Retail Lease Act 1994 (NSW).

The Legislation in Action

On 31 July 2020, the Supreme Court of New South Wales published the decision of Sneakerboy Retail Pty Ltd trading as Sneakerboy v Georges Properties Pty Ltd [2020] NSWSC 996The application of the newly formed COVID-19 Amendment legislation was used in this case whereby the tenant, Sneakerboy applied for relief against forfeiture after the termination of the lease was made by the landlord, Georges Properties Pty Ltd on the 15 March 2020.

Key Facts

  • The tenant, Sneakerboy, had a previous history of failing to pay overdue rent payments owed to the landlord, Georges Property Pty Ltd beginning from 15 March 2016.
  • By 17 March 2020, the tenant was in rent arrears of up to $65,463.03 for the months of January and February 2020.
  • On 23 March 2020 the director of Sneakerboy decided to cease trade as a result of the 4m square rule which allowed only 7 customers into the store at one time, as well as the result of an 85% decrease in trade from the previous year.
  • Around 25 March 2020, the peak of the COVID-19 pandemic, the tenant began to remove stock from the premises and requested to pay their arrears in instalments due to the impact on sales due to the pandemic.
  • The tenant failed to make the payments as per their requested instalment program.
  • The landlord found that the removal of stock held to be an abandonment of the premises and on the 25 March 2020, the landlord issued a notice of termination and re-enter due to the tenant’s alleged abandonment of the premises.
  • In July 2020, the tenant brought the notice to court in an application for relief against forfeiture.

COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW) and other considerations came into place including:

  • The fact that the landlord terminated the lease based on the assumption of abandonment during the pandemic on 25 March 2020, demonstrating the failure to act within the newly formed Retail Lease Act 1994 (NSW) as a result of the COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW).
  • Retail Lease Act 1994 (NSW) s87(1)(b), whereby the landlord is prohibited from “the termination of a lease or tenancy by a lessor or owner of premises or land under the relevant Act in particular circumstances”
  • The Act is very much in favour of the tenant, demonstrating that during the public health emergency, there shall be no termination or repossession made by the lessor/landlord.
  • The National Cabinet Mandatory Code of Conduct: SME Commercial Leasing Principles during COVID-19 was adopted on 7 April 2020
  • This Code, whilst not having a binding effect on the proceedings of this case, held that there must be “a set of good faith leasing principles for application to commercial tenancies”
  • The Code also held that “Landlords must not terminate leases due to non-payment of rent during the COVID-19 pandemic period (or reasonable subsequent recovery period)”.

Outcome

  • The Court found that the tenant’s actions of removing items from the premises, given the current COVID-19 situation, was not an indication of abandonment of premises.
  • Given this, the Court held that the only grounds for termination was the fact that the tenant was in rental arrears.
  • The Court called on the bank guarantee to be paid to the landlord, which was 10 months of rent + GST, amounting to $253,668.90. This was despite the fact that the amount owing to the landlord was less than the amount of the bank guarantee.
  • The Court noted that the tenant would be granted relief against forfeiture on the grounds that they pay the cost of the landlord’s legal proceedings and produce a new bank guarantee.

Key Takeaways

  • As a landlord, it is important not to assume that a tenant has abandoned the premises.
  • Rental arrears may not be adequate as a basis for the termination of a lease.
  • It is important to consider new, evolving legislation in the time of a global pandemic.

If you would like to understand the new COVID-19 legislation and whether it applies to you, please don’t hesitate to contact a member of Coleman Greig’s Commercial Property team, who would be more than happy to assist you today.

Share:

Send an enquiry

Any personal information you provide is collected pursuant to our Privacy Policy.

Categories
Archives
Author

More posts

Employers should exercise caution when dismissing during probationary period

Can you dismiss an employee during the probationary period? Yes, but a recent case is a lesson in caution. The recent Federal Court decision of ‘Dabboussy v Australian Federation of Islamic Councils’ is a warning to employers to consider the importance of timing if dismissing an employee during probation.

The business impacts from the Government’s new cyber security laws

Cybercrime ‘is a multibillion-dollar industry that threatens the wellbeing and security of every Australian’. In an effort to combat the impact on businesses and individuals, the Australian Government has introduced cyber security legislative reforms into the Parliament.

A guide to intrafamily adoption

Adoption is the process where a parent’s legal rights for their child are transferred to another person. The formal adoption of a stepchild or close relative is known as intrafamily adoption.

Passenger movement and visa data-matching by the ATO

Heading overseas for work or a holiday? Taxation issues, including tax residency, should be on front of mind when departing from or arriving to Australia. Why? Because the Australian Taxation Office (ATO) can follow your footprints and, if you’re not careful, spring unexpected taxes on you.

Is it really necessary for my executor to have so many powers?

People often question why the executor of their estate needs to have so many powers. Simply put – if your executor isn’t given any additional powers by your Will, then they are limited to what is set out in the Trustee Act. One area that this can lead to issues in, is the family home – particularly if beneficiaries aren’t in agreement.

Essential terms of a commercial lease

A commercial lease is a contract that details the rights and obligations of a tenant and landlord. So, what are the necessary terms of a commercial lease?

Responding to data breaches

In the final part of our four-part series on your business’ responsibilities related to cyber attacks and data breaches, Special Counsel John Bennett how businesses should respond to data breaches, including application and requirements of the Notifiable Data Breaches Scheme.

Security of personal information

Part 3 of a four-part series on your business’ responsibilities related to cyber attacks and data breaches where Special Counsel, John Bennett provides an overview of some court decisions and proceedings where ‘security’ of personal information has come into issue.

Parental alienation in Family Law

The concept, Parental Alienation Syndrome, was initially brought about by American psychiatrist Richard Gardner in 1985. The term parental alienation is used to describe a situation where one parent is involved in psychologically manipulating their child to turn against the other parent.

Are you liable for labour hire workers if they are injured?

Many employers (host employers) engage employees of labour hire companies, particularly in the building and construction, hospitality and manufacturing industries. However, what happens when one of these employees gets injured at the host employer’s work site? Who is liable for the injuries?

© 2024 Coleman Greig Lawyers  |  Sitemap  |  Liability limited by a scheme approved under Professional Standards Legislation. ABN 73 125 176 230