COVID-19 | Further COVID-19 Tenancy Update
On 24 September 2020, we published a COVID-19 Tenancy Update regarding the extension of the Retail and other Commercial Leases (COVID-19) Regulation (Regulation) until 31 December 2020. This article can be located here.
On 16 December 2020, the NSW Government has announced the Regulation will be extended again, this time until 28 March 2021. This extension is evidenced by the Retail and Other Commercial Leases (COVID-19) Regulation (No 3) 2020 (Extended Regulation) which commenced on 1 January 2021.
In short, the Regulation gives effect to the National Cabinet Mandatory Code of Conduct – SME Commercial Leasing Principles During COVID19. This Code sets out guidelines to be followed in the granting of rent relief to tenants effected by COVID19, focussing on the principle of proportionality. That is, any rent relief granted to a tenant should be proportionate to that tenant’s turnover decline as a result of COVID-19.
There are some important changes to the eligibility criteria for this extension period. The Regulation previously applied to both commercial and retail tenants with an annual turnover of less than $50 million where the relevant tenant had experienced a turnover decline of at least 30%. However, the Extended Regulation applies to a limited category of tenants.
For the Extended Regulation to apply, the relevant lease must be a retail shop lease with:
- an annual turnover less than $5 million in 2018 – 2019; and
- a 30% decline in turnover for the December 2020 quarter (or 15% turnover decline for not-for-profit tenants) relative to a comparable period in 2019 based on actual GST turnover.
It is important to note that the prescribed period with respect to commercial leases has NOT been extended – the prescribed period ending on 28 March 2021 only applies to retail shop leases. Accordingly, generally, landlords of commercial leases not caught by the Extended Regulation are no longer prohibited from taking prescribed actions against their tenants.
As a result of the more limited eligibility criteria, tenants who have already enjoyed rent relief under the Regulation must now re-establish their eligibility under the Extended Regulation.
While there has currently been no decision to extend the Extended Regulation beyond 28 March 2021, the NSW Government has not ruled it out — stating that they will continue to consult with stakeholders regarding any possible further extensions.
For more information about the Extended Regulation you can visit https://www.smallbusiness.nsw.gov.au/get-help/covid-19/commercial-leases-and-covid-19-faqs.
We will provide any further updates in relation to the COVID-19 legislation relating to leases as they become available.
The Swaab property team