Queensland introduces regulations to mitigate effect of COVID-19 on commercial tenancies.

On 28 May 2020, the Queensland Government introduced the Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Regulations).

These Regulations provide clarity on how the National Cabinet’s Code of Conduct (Code) is to be implemented in Queensland.

The Regulations apply from 29 March 2020 to 30 September 2020 (Response Period).

Who do the Regulations apply to?

The Regulations apply to ‘affected leases’, which are leases where:

• the lease is a retail shop lease or wholly or predominantly used for carrying on a business;
• the lease is current and binding on the tenant at 28 May 2020;
• the tenant is a SME entity (a business or non-profit body with estimated turnover of less than $50million for the current financial year, or actual turnover of less than $50million for the previous financial year); and
• the tenant is eligible for JobKeeper.

Note that there are exceptions to this application including leases for a farming business.

Protections provided.

The Regulations prohibit a landlord from taking ‘prescribed action’ against a tenant, if it breaches the lease during the Response Period by failing to:

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

‘Prescribed action’ includes:

• recovery of possession;
• termination of the lease;
• eviction of the tenant;
• re-entry to the premises;
• seeking damages or payment of interest on unpaid rent or outgoings; and
• claiming on a bank guarantee, indemnity or security deposit for unpaid rent or outgoings.

However, a landlord can take such prescribed action where:

• a court or tribunal orders it;
• the parties agree, including under a lease variation or settlement agreement;
• the tenant has substantially failed to comply with the required rent negotiations despite a genuine attempt by the landlord to negotiate rent and other conditions of the lease; or
• the prescribed action is taken by a landlord for non-COVID-19 reasons.

Landlords are also prohibited from increasing rent during the Response Period.

Offer of rent relief.

A landlord must offer a rent reduction and other proposed changes within 30 days of exchanging the relevant information. The landlord’s offer must:

• be at least a 50% reduction on rent in the form of a waiver; and
• have regard to:
  • all the tenant’s circumstances, including turnover reduction;
  • whether failure to reduce the rent would compromise the tenant’s ability to fulfil the lease obligations;
  • the landlord’s financial position; and
  • any waiver or reduction or outgoings (such as tax, rates or statutory charges).

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 Response Period;
• the apportionment between waiver and any other form of rent relief;
• the timetable for deferral repayments; and

We can help.

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

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