Guidelines for Commercial Leasing During COVID

Article Matthew Williams 17 September 2020

As the COVID-19 pandemic continues, a growing number of businesses are finding it difficult to maintain operations.  From cafes and retail outlets, through to children’s play centres and gyms, the impact of the pandemic has been felt in businesses across the St George and Sutherland Shire region and beyond.  If you are a small business owner, or commercial landlord, the team at CDQ lawyers can provide advice and assistance to help you navigate the economic downturn.

Commercial Leasing Relief

From 24 April 2020, the NSW Government enacted Regulations to implement the National Code of Conduct for Commercial Leases.  The Regulations incorporate the Code originally announced by the Prime Minister, as well as some other obligations, and are designed to protect and support commercial tenants in financial distress due to the impacts of COVID-19.

The aim of the Regulations is to try and protect NSW businesses and maximise the number of businesses that can resume normal operations when the impact of COVID has passed.  It is also an attempt to keep businesses in operation so that they can rebound as quickly as possible, and support both their employees and the economy in the future.  

What is included in the Regulations?

1. Guidelines on Rent Reduction

  • Under the Regulations, eligible commercial tenants can ask their landlord to renegotiate rent and other terms of the lease if they are suffering a loss of income due to the impact of COVID-19.
  • Landlords are required to offer reductions in rent proportionate to the tenant’s decline in turnover (in the form of deferrals and waivers).
  • Rent waivers must constitute at least 50% of the rent reduction.
  • Any deferred rent must be paid over the balance of the lease term.

 

2. Other Protections

  •  A landlord cannot evict a tenant for non-payment of rent or outgoings.
  • A landlord cannot evict a tenant because the business is not opening during the hours specified under the lease.
  • A landlord cannot recover a security bond of guarantee for non-payment of rent, increase a tenant’s rent or charge interest or fees on any unpaid rent.

 

Is Your Business Covered?

The rent relief and protective measures included in the Regulations apply to all commercial tenants (with retail, office and industrial leases) in the same way as the JobKeeper Scheme, that is, they cover businesses who:

a) had an annual turnover of less than $50 million in 2018-2019; and

b) have experienced at least a 30% decline in turnover when compared with the corresponding month, or quarter, in 2019

 

If you are a commercial tenant, or a landlord, and would like to find out more about commercial leasing and the Regulations, or need to speak to a lawyer about any issues that have arisen for your business during the pandemic, call CDQ on 02 8556 0130.

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