4 May 2020 | Reading time: 2 minutes
On 24 April 2020, the New South Wales Government passed the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (NSW)(Regulations).
The Regulations give effect to the National Cabinet’s mandatory Code of Conduct for commercial tenancies (Code). As outlined in our recent blog, the Code includes overarching principles to provide landlords and tenants with a framework to help navigate through the changes to the leasing landscape during COVID-19.
Who do the Regulations apply to and for how long?
The Regulations are intended to apply from 24 April 2020 to 24 October 2020 (prescribed period) and protect an ‘impacted lessee’ in various ways.
An ‘impacted lessee’ is defined in the Regulations as a tenant:
Where the tenant is part of a corporate group, turnover is calculated with reference to the turnover of the whole group. Additionally, turnover includes internet sales.
Limits imposed on landlord powers.
During the prescribed period under the Regulations, the landlord is prohibited from:
The above prohibitions protect an ‘impacted lessee’ even where that party fails to:
Furthermore, any act or omission by an ’impacted lessee’ that is required by law in response to the COVID-19 pandemic will not:
Obligation to negotiate.
The Regulations state that if a request is made by either party, the parties must renegotiate the rent payable, in good faith, having regard to:
The parties can however, contract out of the Regulations.
Where parties are unable to come to an agreement, the matter will be referred to the Small Business Commissioner for mediation.
Nothing in the Regulations is intended to prevent landlords from taking legal action against tenants on grounds not related to the economic impacts of the COVID-19 pandemic (eg pre-existing breach).
Formalising revised rent agreements.
Any commercial agreement reached between the parties should be documented in a variation deed to ensure it is binding between the parties and their successors.
The variation deed should include provisions regarding:
We can help.
If you are in the process of renegotiating your lease, we can help you engage in good faith negotiations in line with the Regulations and the principles of the Code, and assist you to draft a variation deed 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.