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COMMERCIAL LEASES AND COVID-19 IMPACTS

COMMERCIAL LEASES AND COVID-19 IMPACTS

The current Covid-19 pandemic has impacted Tenants and Landlords with the recent changes implemented by the NSW Government on leasing regulations for leases signed before 26 June 2021. The various changes and impacts on Landlords and Tenants can be seen in the Retail and Other Commercial Leases (Covid-19) Regulation 2021.

For what period will these changes be in effect?

Leasing regulations will be impacted from 13 July 2021 to January 2022 (“relevant period”).

What changes have occurred?

There are various  requirements which will be discussed below as to how a Tenant will qualify as an ‘Impacted Lessee’. If a Tenant meets the requirements of an Impacted Lessee, the Tenant will be protected with no rental increase during the relevant period and will be entitled to request a commercial tenancy rent reduction, and Landlords will be required to renegotiate a Tenant’s rent and other lease terms (if requested) and will not be able to draw on bank guarantees for rental payment, demand rent be paid, or take any prescribed action against the Tenant (as detailed below)

“Impacted Lessee” Qualification

In order to qualify as an “Impacted Lessee”, a Tenant must:

  1. Meet the requirements of one of the following NSW Government Relief Schemes:
  • 2021 Covid-19 Micro-business Grant; or
  • 2021 Covid-19 Business Grant; or
  • 2021 JobSaver Payment; and
  1. Have a 2021-2022 revenue under $50 million.

It is critical for the Tenant to provide the Landlord with evidence of how the Tenant has been impacted and a Statement outlining that the Tenant is an Impacted Lessee.

Landlords are allowed to request evidence from the Tenant on a fortnightly basis showing they remain in an “impacted” status. If the Tenant is no longer impacted, the Tenant or the Landlord will be able to renegotiate the lease.

Obligations of Landlord and Tenants

No Increase in Rent

Rent must not be increased during the relevant period unless it is turnover rent.

No Action Against the Tenant

The Landlord cannot take prescribed action against the Tenant, meaning, the Landlord cannot proceed with any of the following:

  • provisions of the commercial lease;
  • issue court proceedings to recover damages;
  • demand rent;
  • recover any security bond;
  • evict the lessee from the premises;
  • draw on any bank guarantee;
  • terminate the lease; or
  • any other remedy at common law.

Obligation to Mediate

If there is a dispute between the Landlord and an Impacted Tenant, or there has been a breach of one of the prescribed terms of the lease during the relevant period, the parties must attend mediation.

How we can help you

JHK Legal can assist individuals in relation to disputes between landlords and tenants. We also regularly act in matters involving lease breaches.

If you would like any assistance with commercial or retail leasing, or understanding your rights as a Tenant or Landlord, please do not hesitate reach out to the JHK Legal team to obtain advice on your rights, interests and obligations on such a matter.

Written by Katy Sakoulas

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