COVID-19 commercial tenancy regulations: SA follows suit.

On 15 May 2020, the South Australian Government introduced the COVID-19 Emergency Response (Commercial Leases No 2) Regulations 2020 (SA) (Regulations). These Regulations give effect to the National Cabinet’s mandatory Code of Conduct for commercial leasing (Code) and coincide with the COVID-19 Emergency Response Act 2020 (SA) (Act).

The Regulations apply from 30 March 2020 to 30 September 2020 (prescribed period) and

implement temporary protection measures for parties of commercial leases experiencing unprecedent circumstances brought about by COVID-19.

Who do these Regulations apply to?

The Regulations apply to ‘affected lessees’ of commercial leases, who have a business turnover of less than $50 million and suffered from financial hardship due to COVID-19.

A lessee will be suffering from ‘financial hardship’ if they are eligible for, or receiving, JobKeeper in respect of its business.

Protections for ‘affected lessees’.

The Regulations prohibit a lessor from taking ‘prescribed action’ against a lessee, if it breaches the lease by failing to:

• pay rent;
• pay outgoings; or
• open for business during the hours specified in the lease.

‘Prescribed action’ includes:

• evicting the tenant;
• exercising a right of re-entry
• seeking damages;
• requiring interest on unpaid rent;
• terminating the lease or;
• remedies otherwise available at law.

In addition, lessors are also prohibited from:

• increasing the rent;
• requesting the lessee to pay or reimburse them for land tax.

Negotiations for rent relief.

Parties to the lease are now required to negotiate, in good faith, the amount of rent payable, having regard to:

• the economic impacts of COVID-19 on the parties;
• the provisions of the Act and the Regulations; and
• the provisions of the Code.

What information can be shared during the negotiations?

During these negotiations a lessor can ask for the following information from a lessee:

• any information that the lease expressly requires;
• turnover sales information
• eligibility of JobKeeper;
• Business Activity Statements.

A lessor is not entitled to seek financial information from the lessee as follows:

• profit and loss information;
• bank statements and trust account information;
• rent and outgoings paid.

Formalising revised rent.

Any commercial agreement reached between the parties should be carefully documented by way of a Deed of Variation to ensure it is binding between the parties and their successors.

The Deed of Variation should include provisions regarding:

• the period during which the variation applies;
• the amount of rent to be paid during the prescribed period;
• the apportionment between waiver and deferral;
• the timetable for deferral repayments; and
• confidentiality.

We can help.

If you are in the process of renegotiating your lease, we can help you navigate this process in line with the Regulations, and assist you to draft a Deed of Variation which covers all of the important points listed above.

For details of all of our COVID-19 tips and updates, visit the Bespoke COVID-19 Hub.