Retail and Oth­er Com­mer­cial Leas­es (COVID-19) Amend­ment Reg­u­la­tion 2021

Vic­to­ria has passed enabling leg­is­la­tion for anoth­er rent relief scheme for retail and com­mer­cial ten­ants. How­ev­er, the spe­cif­ic details about how this new scheme will oper­ate will be in the Reg­u­la­tions, which have not been pub­lished. As of the date of this update, no oth­er State or Ter­ri­to­ry has announced any new rent relief arrangements. 

13 July 2021 to 13 Jan­u­ary 2022 is the Pre­scribed Period

The Retail and Oth­er Com­mer­cial Leas­es (COVID-19) Amend­ment Reg­u­la­tion 2021 (NSW) (2021 Reg­u­la­tion) oper­ates from 13 July 2021 to 13 Jan­u­ary 2022, called the ​‘Pre­scribed Peri­od’, in con­nec­tion with leas­es that were entered into before 26 June 2021. 

Applic­a­ble to an Impact­ed Lessee

The Reg­u­la­tion applies to an ​‘Impact­ed Lessee’, being a ten­ant that:

• qual­i­fies for one or more of the fol­low­ing grants: 2021 COVID-19 Micro-Busi­ness Grant, 2021 COVID-19 Busi­ness Grant and/​or 2021 Job­Saver Pay­ment (each of which requires a 30% decline in turnover); and 
• has a turnover of less than $50 mil­lion for the 2020/2021 finan­cial year, inclu­sive of any online sales.
• First — A land­lord must not ter­mi­nate a lease, call on a bank guar­an­tee or take any oth­er usu­al enforce­ment mea­sures dur­ing the Pre­scribed Peri­od as a con­se­quence of non-pay­ment of rent or out­go­ings or for not open­ing dur­ing the trad­ing hours in the lease (unless it is a breach that occurred before the Pre­scribed Period).
• Sec­ond — The Reg­u­la­tion requires the rent to be rene­go­ti­at­ed by tak­ing into con­sid­er­a­tion the eco­nom­ic impacts of the COVID-19 pan­dem­ic and the leas­ing prin­ci­ples from the Nation­al Cab­i­net Manda­to­ry Code of Con­duct – SME Com­mer­cial Leas­ing Prin­ci­ples dur­ing COVID-19 (Code). The rel­e­vant require­ment under the Code to give the ten­ant rent relief in pro­por­tion with the tenant’s decline in turnover.

If the ten­ant is part of a group of com­pa­nies, the turnover of the group is applic­a­ble. If the ten­ant is a fran­chisee, the turnover of the busi­ness con­duct­ed at the par­tic­u­lar premis­es is the rel­e­vant turnover.

The Key Features 

As in the case of the 2020 Reg­u­la­tion, this new 2021 Reg­u­la­tion has 2 essen­tial fea­tures, being: 

The land­lord and the ten­ant must com­mence the nego­ti­a­tion of the rent relief in good faith with­in 14 days of the ten­an­t’s request.

Rent waiv­er and deferral

A rent waiv­er must be giv­en for at least 50% of the total reduc­tion of rent, and a rent defer­ral applies to the bal­ance. The rent defer­ral com­po­nent is set out in the Code, which requires the repay­ment of any rent defer­ral com­po­nent to be amor­tised over the bal­ance of the lease term or for a peri­od of not less than 24 months, whichev­er is the greater. This deferred pay­ment régime can only com­mence after the end of the Pre­scribed Peri­od, which is 13 Jan­u­ary 2022.

The press releas­es for the new Vic­to­ri­an scheme sug­gest that any cur­rent rent defer­ral pay­ments that result from the pre­vi­ous scheme will be frozen at the option of the ten­ant until the end of the new scheme (15 Jan­u­ary 2022), and added to any rent deferred under the new scheme. This is not specif­i­cal­ly dealt with in the NSW Reg­u­la­tion and there­fore the pre­sump­tion is that the exist­ing defer­ral pay­ments continue. 

Turnover com­par­i­son

Anoth­er aspect that is not absolute­ly clear is the applic­a­ble com­par­i­son peri­od to assess the ten­an­t’s reduc­tion in turnover. In the case of the first scheme (intro­duced in 2020), the com­par­i­son was to a pre-pan­dem­ic peri­od, as the ten­an­t’s turnover was com­pared with the same month in 2019. 

It is rea­son­able to take guid­ance from the eli­gi­bil­i­ty cri­te­ria for the 2021 Job­Saver Pay­ment. A busi­ness is eli­gi­ble for the Job­Saver Pay­ment if from 26 June 2021 it expe­ri­enced a decline in turnover of 30% or more over a 2 week peri­od as com­pared to: (1) the same peri­od in 2019; (2) the same peri­od in 2020; or (3) the 2‑week peri­od imme­di­ate­ly before lock­down com­menced (being 12 to 25 June 2021). There is a cer­tain log­ic to com­par­ing August 2021 with either August 2020 or August 2019.

Dis­putes

The dis­pute res­o­lu­tion process in part 8 of the Retail Leas­es Act 1994 (NSW) applies to dis­putes regard­ing a rel­e­vant breach of a lease dur­ing the Pre­scribed Peri­od, being non-pay­ment of rent or out­go­ings or not open­ing for busi­ness dur­ing the hours required by the lease.

How can we help you?

Please call or email us if you have any ques­tions or require assis­tance with the appli­ca­tion of this scheme.

To view our COVID-19 updates and pub­li­ca­tions or to make an online enquiry please click here.

Kind regards

The Swaab prop­er­ty team