NSW GOVERNMENT 2021 COVID-19 LEASES REGULATIONS

As you may already be aware, the NSW Government have introduced two new COVID-19 regulations to protect tenants during the COVID-19 pandemic.  In summary, the two new regulations protect retail and residential tenants from being evicted from the premises for certain types of breach of lease that occur during the prescribed period.  We summarise the key points of each of the regulations as follows.

Retail and Other Commercial Leases (COVID-19) Regulation (“The Retail Regulations”) 2021 – https://legislation.nsw.gov.au/view/pdf/asmade/sl-2021-379

What Leases are covered by the Retail Regulations?

The Retail Regulations apply only to commercial leases, which is defined under the Retail Regulations as a retail shop, excluding:

  • A lease entered into on or after 26 June 2021 (unless it was an option, extension and renewal of lease);
  • A lease under the Agricultural Tenancies Act 1990; or
  • All other commercial lease agreements relating to the leasing of premises or land for commercial purposes.

Does the Lessee qualify for the rights prescribed by the Retail Regulations?

The lessee must be an impacted lessee to exercise certain rights prescribed by the Retail Regulations for breach of the lease.  A lessee is an impacted lessee if:

  • The lessee qualifies for one or more of the following grants:
    • Micro-business COVID-19 Support Grant;
    • COVID-19 NSW Business Grant;
    • Job Saver Grant; and
  • The lessee’s turnover (including internet sales) in the 2020-2021 financial year was less than $50 million:
    • If the lessee is a franchise – the turnover is calculated as the turnover conducted at the premises or land subject to the lease.
    • If the lessee is a corporation that is the member of a group – the turnover of the group.
    • In any other case – the turnover of the business conducted by the lessee.

The lessee must give the lessor the following information:

  • A statement that the lessee is an impacted lessee; and
  • Evidence that the lessee is an impacted lessee, which includes tax return or other statement detailing financial turnover and proof the lessee qualifies for one (or more) of the grants mentioned at 1.2(a) above.

What benefit does an impacted lessee have under the Retail Regulations?

The lessor must not take a prescribed action against an impacted lessee if that lessee makes a prescribed breach during the prescribed period.

A prescribed breach means failure to pay rent or outgoings or the failure of the business to be open for business during the hours specified by the lease.

The prescribed period commences 13 July 2021 and ends on 20 August 2021.  A prescribed action includes:

  • Eviction of the lessee from the premises;
  • Exercising a right of re-entry or recovery of the premises;
  • Distraint of goods;
  • Forfeiture;
  • Damages;
  • Requiring payment of interest or other fees relating to unpaid rent;
  • Recovery of the security bond;
  • Performance of obligations under a guarantee;
  • Possession or termination of the lease;
  • Any other remedy available to the lessor against the lessee at common law.

Is the Lessor required to defer or waive the rent?

Unlike the 2020 COVID-19 Retail Regulations, there is no obligation on the lessor to renegotiate, defer or waive the rent.

Residential Tenancies (COVID-19 Pandemic Emergency Response) Amendment Regulation (“The Residential Regulations”) 2021https://legislation.nsw.gov.au/view/pdf/asmade/sl-2021-378

What Tenants are covered by the Residential Regulations?

An impacted tenant under the Residential Regulations means a tenant who is a member of a household impacted by COVID-19.  The person impacted by COVID-19 need not be the tenant listed on the lease, but can be another rent-paying member of the household.

The household is impacted by COVID-19 if:

  • One or more rent-paying members of the household having lost employment, had a reduction in hours of work or a reduction in income due to COVID-19 or has had to stop working, or reduce the work hours, because they, or a household member, has been ill with COVID-19; or
  • As a result of any of the matters in paragraph 2.2(a), the weekly household income has been reduced by at least 25% compared to the average weekly household incoming for the 4 weeks immediately preceding 26 June 2021.

What benefit does an impacted tenant have under the Residential Regulations?

The moratorium period commences on 14 July 2021 and ends on 11 September 2021.

During the moratorium period the tenant is exempt from any provision of the Residential Tenancies Act or regulations that would result in the termination of the tenancy agreement or recovery of possession of the premises for non-payment of rent or other charges.

For the tenant to be entitled to the benefits under the Residential Regulations the tenant must give notice to the landlord that the tenant is an impacted tenant and must continue to pay the landlord at least 25% of the rent payable under the tenancy agreement.

Please contact our Commercial team if we can assist you with any enquiries.

Peter McLachlan, Partner, pmclachlan@mtpartners.com.au

Chao Deng, Partner, Accredited Business Law Specialist, cdeng@mtpartners.com.au

Chelsea Hughie-Williams, Solicitor, chughie-williams@mtpartners.com.au

Disclaimer:  This article is intended to provide general information only, and is not to be regarded as legal advice. Formal legal advice should be sought in relation to particular transactions or circumstances.

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