The Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW), which commenced on 24 April 2020, is the NSW government’s response to the National Government’s Mandatory Code. Click here to read our previous article on the Code. The Regulations are valid from 24 April 2020 until 24 October 2020 only and apply to Leases (an Impacted Lease):
- where the Lessee qualifies for JobKeeper and its turnover in the 2019 financial year was less than $50 million, having regard to the following:
- if the Lessee is a franchisee – the turnover of the business conducted at the premises or land concerned,
- if the Lessee is a corporation that is a member of a group – the turnover of the group, and
- in any other case – the turnover of the business conducted by the Lessee.
- entered into prior to 24 April 2020 (apart from a Lease under the Agricultural Tenancies Act 1990), and
- entered into after 24 April 2020 by way of an option to extend or renew an existing Lease.
The relevant provisions of the Regulations are summarised below.
Obligation to Negotiate Rental & Lease Terms
At the request of either party to an Impacted Lease, both parties must negotiate in good faith the rent payable and other provisions of the Lease, having regard to the economic impacts of the current pandemic and the Code. Whilst the Regulations cross refer to the Code, parties to an Impacted Lease are not strictly required to comply with the requirements outlined in the Code for the form of rent relief provided. The Regulations, further, do not impose a requirement for the duration of any rent relief.
However, the Regulations require Tribunals and Courts, when considering recovery, termination or enforcement proceedings against a Lessee of an Impacted Lease, to have regard to the Code.
Lessors are specifically prohibited from taking any action against a Lessee of an Impacted Lease during the Prescribed Period for failure to pay rent, failure to pay outgoings or not being open for business during required hours. Such action includes terminations, evictions, enforcement of guarantees, damages, various other actions and any other common law or statutory remedies.
There are three exceptions to the above:
- Where the parties to the Impacted Lease agree that the action be taken,
- If the action is taken on grounds unrelated to COVID-19, and
- If the Lessor of an Impacted Lease has complied with the negotiation requirements and participated in the mandatory dispute resolution process.
The Regulations required the parties of an Impacted Lease to engage in alternative dispute resolution as a condition precedent to the commencement of Court or Tribunal proceedings.