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COVID-19 Regulations 2021 for Retail and Commercial Leasing – The Great Stalemate!

Luke Mitchell ||

Whilst we can applaud NSW Government for last week implementing the latest COVID-19 regulations relating to retail and commercial leasing quickly in response to the latest lockdown. To my mind, the Retail and Other Leases (COVID-19) Regulation 2021 [NSW] (“the 2021 Regulation”) will not provide much guidance for either landlords or tenants. At a time of uncertainty for many businesses and property investors, and in my experience and anecdotal feedback, 2021 lockdown feels different and harder. It’s a shame that we were not provided with better guidance.

The Upshot?

Unlike the 2020 versions (there were 3 released last year), there is no rent relief, but merely restrictions on terminating and other actions to enforce the lease. The current regulations do not in any way provide guidance as to what a landlord will do when faced with a claim for rent relief or how a tenant can claim rent relief. The 2021 Regulation provides that a landlord cannot take prescribed action against an impacted lessee for a prescribed period unless the matter has been referred to mediation or a certificate has been provided to say the mediation has failed. The regulations also do not apply to any leases entered after 26 June 2021.

What is the prescribed period?

The prescribed period is between 13 July 2021 and 20 August 2021.

What is an impacted lessee?

To be an impacted lessee you must have turnover in the 2020-2021 financial year of less than $50 million and qualify for either the Micro-business COVID-19 Support Grant, COVID-19 NSW Business Grant or Job Saver Grant. The tenant will be required to provide a statement to the effect that they are an impacted lessee and evidence of the same.

My concern is that given these grants are new, what evidence is needed to satisfy a landlord that the tenant qualifies for the same. Also, could there be circumstances where a tenant qualifies but is not in receipt? The 2021 Regulation would suggest that receipt is not necessary.

Beware that the information must be provided as soon as possible after the breach of lease occurs and must be provided in a reasonable time after it is requested by your landlord.  In my experience over 25 years, when legislation starts using the words ‘reasonable time’ and ‘as soon as possible’, the door has been left wide open for interpretation and debate.

What is prescribed action?

Prescribed action includes taking action under your lease or seeking or court or tribunal orders for eviction, recovery of premises, damages, interest, termination, recovery of bind or any other remedy a landlord may have.

Note that the 2021 Regulation does not prevent a landlord for taking action on grounds not related to the economic impacts of the COVID-19 pandemic. But what does this actually mean? How does a landlord prove this? There is a notation in the 2021 Regulation giving an example – such as termination in the event of breach of lease as a result of damage to premises or a tenant failing to vacate a premises following expiry of the lease.

The cold hard reality?

I have spent nearly 18 months embroiled in COVID-19 related leasing disputes (including those masked as the same but were really the result of long standing enmity between parties, people trying to take advantage during tough times or outlandish legalism) – this included mediations, negotiations and sadly terminations.  The 2020 version of COVID-19 related regulation at least had a consistent standard of qualification (JobKeeper) and gave some guidance on rental relief (albeit leaving lots of room for negotiation). Notwithstanding this, many disputes were drawn out and faced stalemate as parties tried to work out and work around the regulations or waited in line for a mediation.

However, this time around the 2021 Regulation is more vague, going to lead to further stalemate and provides no guidance on how to tackle rent relief – which in the end is what a tenant is seeking.  All the 2021 Regulation does is put off the inevitable!

Please reach out to me if you need assistance in any COVID-19 related tenancy issues and please stay safe.

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