Lockdown reprieve as NSW approves rent relief for commercial and retail tenants

Lockdown reprieve as NSW approves rent relief for commercial and retail tenants

NSW businesses are breathing a little easier as rent relief is reintroduced in the wake of 2021’s prolonged lockdowns

NSW businesses are breathing a little easier as rent relief is reintroduced in the wake of 2021’s prolonged lockdowns

In 2021, Covid-19 has once again dealt huge blows to businesses, especially during Victoria and NSW’s prolonged lockdowns. Many businesses have been forced to completely close, while others have dramatically scaled back their operations. Deep financial pain looms, especially for commercial and retail tenants with rent obligations. But the NSW Government has stepped in, reactivating regulations for rent relief that were originally introduced during the 2020 lockdowns.  

What are the NSW rent relief regulations for commercial and retail tenants?

The rent relief regulations that were introduced in 2020 (the Earlier Regulations) were due to expire on 20 August 2021. However, the NSW Government has now extended the regulations (the Updated Regulations) until 13 January 2022.

The Updated Regulations reintroduce the requirement for landlords and tenants to renegotiate the rent payable under impacted leases. The National Cabinet Mandatory Code of Conduct (the Code) has also been reactivated, which requires rent relief assistance for eligible tenants. 

Updated Regulations include:

1. Commercial Lease: The Regulation applies to leases before 26 June 2021, including options exercised after this time but where the original lease predates 26 June 2021.

2. Prescribed Period: The prescribed period is from 13 July 2021 to 22 January 2022.

3. Impacted Lessee: A lessee is an impacted lessee if:

  • The lessee qualifies for one or more of the government’s relief schemes:
    • 2021 COVID-19 Micro-business Grant
    • 2021 COVID-19 Business Grant
    • 2021 JobSaver Payment; and
  • The lessee’s 2020-21 turnover (including at group level) was less than $50 million (Corporations constitute a group if they are related bodies corporate within the meaning of the Corporations Act)

4. Evidence: The tenant must supply a statement and evidence that the lessee is an impacted lessee as soon as possible after a prescribed breach and within a reasonable time after it is requested by the lessor. 

5. Increase Rent: Rent cannot be increased during the prescribed period. This excludes turnover rent. 

6. Prescribed Actions: Where an impacted lessee does not pay rent during the prescribed period (which constitutes a prescribed breach), landlords cannot take prescribed actions (for example,  demanding rent, drawing on bank guarantees, or eviction) unless:

  1. The matter has been referred to mediation and the Registrar has certified in writing that the mediation has failed to resolve the dispute; and 
  2. If the lessee has requested a renegotiation, there has been a renegotiation.

7. Obligation to Renegotiate: Even if a landlord does not want to take a prescribed action, either party to the lease can request renegotiation if they meet the requirements:

  • The parties must renegotiate in good faith the rent payable under, and other terms of, the impacted lease;
  • Renegotiations must commence within 14 days of receiving the request, or another period agreed to by the parties; and
  • The parties must consider the Code and COVID-19’s economic impacts. This includes the 50 per cent waiver or deferral

If an impacted lessee does not participate in renegotiation, the landlord is taken to have complied with its obligations with respect to renegotiation. This does not, however, alleviate the landlord of its obligation to mediate.

8. Relief for Landlords: Eligible landlords who reduce the rent of tenants for any period between 1 July and 31 December 2021 can apply for a land tax concession of up to 100% of their 2021 land tax liability.

Small commercial or retail property owners may be eligible for relief under the Commercial Landlord Hardship Fund.

The final word

The NSW rent relief measures for commercial and retail tenants offer a much-needed reprieve for NSW business operators, however, the regulations continue to depend on the ability of tenants and landlords to negotiate. If you have questions or concerns, you should seek legal advice as soon as possible.

Contact us to learn more about NSW rent relief for commercial and retail tenants.