The NSW Government has reintroduced the Retail and Other Commercial Leases (COVID-19) Regulation 2021 (NSW) which provides mandatory rent relief to be negotiated between landlords and tenants under an impacted retail shop lease. An impacted lease is defined as a lessee:
- Who qualifies for 1 or more of the New South Wales Government’s COVID-19 Grants (including the Micro-business COVID-19 Support Grant, COVID-19 NSW Business Grant or Job Saver Grant); and
- Whose turnover in the 2020-21 financial year was less than $50 million.
A new commercial lease entered into after 26 June 2021 will not be eligible for the mandatory protection unless this was entered into by exercising an option to renew or extend an existing lease.
Broadly, the regulations prevent a landlord taking any prescribed action including:
- Eviction;
- Recovering a security deposit;
- Terminating the lease;
Unless the parties have first renegotiated rent and attempted mediation.
Additionally the National Cabinet’s Mandatory Code of Conduct for Commercial Leasing has been reinstated as of 13 August which requires landlords to provide rent relief in proportion with their tenant’s decline in turnover. Of the rent relief provided, at least 50 per cent must be in the form a waiver, and the balance a deferral.
The mandatory code of conduct requires negotiations to take into account a tenants decline in turnover and apply rent relief in proportion to this decline in turnover. Of the rent relief provided, 50% is to be a waiver of rent, and the remaining 50% as a deferral or rent. As an example a retail shop that has experienced a 70% decline in trade will be entitled to request a 35% rent waiver, and a 35% rent deferral.
An impacted lessee must give the lessor the following information in respect of the impacted lease:
- a statement to the effect that the lessee is an impacted lessee
- evidence that the lessee is an impacted lessee.
The information may be given before, or as soon as practicable after, a prescribed breach occurs, and must be given within a reasonable time after it is requested by the lessor.
Parties are expected to negotiate in good faith for the protections to apply.
SUPPORT FOR LANDLORDS
Hardship payments: According to the announcement a new $40 million Hardship Fund will also be established to provide a monthly grant of up to $3,000 for small commercial or retail landlords who provide rental waivers of at least the value of the grant and any land tax relief they are eligible for. More details will be released soon including how to apply and eligibility requirements.
Land Tax Relief: Land tax relief has been announced for the period from 1 July 2021 to 31 December 2021. The relief will be a reduction in the 2021 tax payable on the parcel of land where rent relief has been given to the tenant who occupies that land and will be the lesser of:
- the amount of rent reduction provided to an eligible tenant for any period between 1 July 2021 and 31 December 2021, or
- 100 per cent of the 2021 land tax attributable to the parcel of land leased to that tenant.
Further information can be found HERE.
