New South Wales Commercial & Retail Tenant Protections

Overview

As of 14 July 2021, there may be new protections available to tenants under New South Wales commercial or retail leases from the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (NSW).

If a tenant is struggling because of the second Sydney lockdown, landlords of some premises will be prevented from a number of actions against the tenant, provided that the tenant is able to satisfy the following criteria.

1.      They qualify for one or more of the following existing grants:

a.      The COVID-19 Micro-Business Grant;

b.      The COVID-19 Business Grant; or

c.      JobSaver;

and

2.      They had a turnover of less than $50million in the 2020-2021 financial year.

Naturally, there are further and specific requirements contained in the existing grants listed above; however, they do apply to leases outside of the Greater Sydney area, not just in the suburbs of Sydney that are directly locked down.

The New Protections

If a tenant satisfies the criteria, then landlords will be prevented from taking a “prescribed action” against them for a “prescribed breach” in the period between 12 July 2021 and 20 August 2021.

The prescribed actions include:

• Evicting the tenant;
• Terminating the lease;
• Claiming damages against the tenant;
• Claiming interest on unpaid money;
• Claiming against a bank guarantee or security bond; and
• Any other adverse action against the tenant under the lease or at law.

A prescribed breach includes:

• Failure to pay rent;
• Failure to pay outgoings; or
• Failing to operate for the required hours specified in the lease.

What About After the Period?

The new protections do not mandate any form of rent relief for the period, that means, whilst landlords are prevented from taking any of the prescribed actions against a tenant during the period, it does not alleviate the tenant from their obligations under the lease.

It is entirely up to landlords and tenants to negotiate any rent relief or allowances during the period, including the terms of bringing payments back up to date, and there appears to be very little guidance at this stage as to whether there are any principles or requirements in this negotiation, although it is assumed that the parties will act in good faith.

Only after negotiations have failed, and the parties have attended mediation on the matter (which has been certified as unsuccessful) will a landlord be able to take a prescribed action.

Moving Forward

Whilst this new piece of legislation does lack a degree of certainty that may be relied upon, these are, indeed, uncertain times.

They do; however, provide some comfort, and hopefully encourage both landlords and tenants to open communication, and negotiate to a mutually acceptable and commercial outcome.

Although the period expires relatively soon, on 20 August 2021, the new Regulation is in force until January 2022. This leaves room for the period to possibly be extended, depending on the ever evolving COVID-19 pandemic.

Moving into the future, it would be wise for both landlords and tenants to consider the impacts of the pandemic that have been felt not only in New South Wales, but nationwide.

Avoiding uncertainty by including clauses in future leases detailing what will happen in these continuing, and future pandemics, would provide a sense of security to both parties and allow a commercially minded frame for negotiations.

If you require any assistance during either this time, or with future lease plans, CJM Lawyers has an experienced team of commercial and property lawyers who are here to help.