COVID-19 Fur­ther COVID-19 Ten­an­cy Update

On 24 Sep­tem­ber 2020, we pub­lished a COVID-19 Ten­an­cy Update regard­ing the exten­sion of the Retail and oth­er Com­mer­cial Leas­es (COVID-19) Reg­u­la­tion (Reg­u­la­tion) until 31 Decem­ber 2020. This arti­cle can be locat­ed here.

On 16 Decem­ber 2020, the NSW Gov­ern­ment has announced the Reg­u­la­tion will be extend­ed again, this time until 28 March 2021. This exten­sion is evi­denced by the Retail and Oth­er Com­mer­cial Leas­es (COVID-19) Reg­u­la­tion (No 3) 2020 (Extend­ed Reg­u­la­tion) which com­menced on 1 Jan­u­ary 2021.

In short, the Reg­u­la­tion gives effect to the Nation­al Cab­i­net Manda­to­ry Code of Con­duct – SME Com­mer­cial Leas­ing Prin­ci­ples Dur­ing COVID19. This Code sets out guide­lines to be fol­lowed in the grant­i­ng of rent relief to ten­ants effect­ed by COVID19, focussing on the prin­ci­ple of pro­por­tion­al­i­ty. That is, any rent relief grant­ed to a ten­ant should be pro­por­tion­ate to that ten­an­t’s turnover decline as a result of COVID-19. 

There are some impor­tant changes to the eli­gi­bil­i­ty cri­te­ria for this exten­sion peri­od. The Reg­u­la­tion pre­vi­ous­ly applied to both com­mer­cial and retail ten­ants with an annu­al turnover of less than $50 mil­lion where the rel­e­vant ten­ant had expe­ri­enced a turnover decline of at least 30%. How­ev­er, the Extend­ed Reg­u­la­tion applies to a lim­it­ed cat­e­go­ry of tenants.

For the Extend­ed Reg­u­la­tion to apply, the rel­e­vant lease must be a retail shop lease with:

• an annu­al turnover less than $5 mil­lion in 2018 – 2019; and
• a 30% decline in turnover for the Decem­ber 2020 quar­ter (or 15% turnover decline for not-for-prof­it ten­ants) rel­a­tive to a com­pa­ra­ble peri­od in 2019 based on actu­al GST turnover.

It is impor­tant to note that the pre­scribed peri­od with respect to com­mer­cial leas­es has NOT been extend­ed – the pre­scribed peri­od end­ing on 28 March 2021 only applies to retail shop leas­es. Accord­ing­ly, gen­er­al­ly, land­lords of com­mer­cial leas­es not caught by the Extend­ed Reg­u­la­tion are no longer pro­hib­it­ed from tak­ing pre­scribed actions against their tenants. 

As a result of the more lim­it­ed eli­gi­bil­i­ty cri­te­ria, ten­ants who have already enjoyed rent relief under the Reg­u­la­tion must now re-estab­lish their eli­gi­bil­i­ty under the Extend­ed Regulation.

While there has cur­rent­ly been no deci­sion to extend the Extend­ed Reg­u­la­tion beyond 28 March 2021, the NSW Gov­ern­ment has not ruled it out — stat­ing that they will con­tin­ue to con­sult with stake­hold­ers regard­ing any pos­si­ble fur­ther extensions. 

For more infor­ma­tion about the Extend­ed Reg­u­la­tion you can vis­it https://​www​.small​busi​ness​.nsw​.gov​.au/​g​e​t​-​h​e​l​p​/​c​o​v​i​d​-​1​9​/​c​o​m​m​e​r​c​i​a​l​-​l​e​a​s​e​s​-​a​n​d​-​c​o​v​i​d​-​1​9​-faqs.

We will pro­vide any fur­ther updates in rela­tion to the COVID-19 leg­is­la­tion relat­ing to leas­es as they become available. 

Kind regards,

The Swaab prop­er­ty team