On 13 August 2021, the NSW government amended the Retail and Other Commercial Leases (COVID-19) Regulation 2021. It aims to protect the rights of impacted tenants by reinstating the Commercial Leasing Code of Conduct for commercial tenancies.

Under this updated regulation, tenants impacted by COVID-19 can renegotiate their lease arrangements and request rent relief with their landlords. In response, landlords must either reduce or waive rental fees.

The law is in effect for six months, starting on 13 July 2021 to 13 January 2022.


What’s in it for you?

As guided by the leasing principles, your landlord must reduce or waive rent in proportion to your decline in turnover. For example, if you experienced a 30% turnover decline, your landlord must also reduce your rent by 30%. 

While the law is still in effect, your landlord can’t take prescribed actions against you when you fail to pay your rent. The examples of these prescribed actions are:

  1. Evicting you from their premises.
  2. Asking you to pay interests or additional fees to unpaid rent.
  3. Terminating your lease contract.
  4. Bringing the issue into court.
  5. Seizing the property.

You’re under the protection of the law unless your landlord can prove that they have tried renegotiating the rent and mediating the issue with you.


Are you eligible for rent relief protections?

You are eligible for the rent relief protections program if:

  1. You are a commercial or retail tenant.
  2. Your business has an annual turnover of less than $50 million in the financial year 2020-2021.
  3. You qualify for any of the following business support:
  4. Your turnover declined by at least 30% because of COVID-19 lockdowns.

Find out which business support payments in NSW are tax-free: List of Tax-Free Business Support Payments in NSW & Victoria


What should you and your landlord do when negotiating?

You and your landlord must follow the principles provided in the Code of Conduct. 

As an eligible tenant:

  1. You must remain committed to the terms of the lease, including the amendments to your rental agreement. Failure to do so will forfeit any protections you have under the Code of Conduct.
  2. You must gradually pay off your rental deferrals within your lease term and for a period of no less than 24 months — whichever is greater — unless otherwise agreed by the parties.
  3. You can extend your lease during the rent waiver and/or deferral period.

On the other hand, your landlord must:

  1. Not terminate your lease for non-payment of rent.
  2. Offer you proportionate reductions in rent based on your turnover decline. Reductions are payable in the form of deferrals and waivers of up to 100% of the amount ordinarily payable.
  3. Pass to you any reduction in statutory charges (for example, land tax and council rates). 
  4. Share with you, proportionately, any benefit they receive from a deferral of loan payments by a bank.
  5. Seek to waive recovery of any other expense you have under the lease terms during the period you can’t trade, if appropriate.
  6. Not charge you additional fees or interest on rent that are waived or deferred.
  7. Not draw on your security for the non-payment of rent during the COVID-19 pandemic or a reasonable recovery period.
  8. Freeze rent increases (except for the real leases based on turnover).
  9. Not prohibit or penalise you, especially if you reduce your business hours or stop doing business because of the COVID-19 pandemic.

You and your landlord should also take note of the following:

  1. Rent waivers, as opposed to deferrals, must constitute at least 50% of the rent reduction provided by landlords. (In negotiating this, regard must be given to the landlord’s financial ability to provide such a waiver).
  2. Repayment of other non-rent expenses should not commence until the earlier of the COVID-19 pandemic ending (as defined by the Australian Government), or the existing lease expiring.

For more information, you can access the Retail and Other Commercial Leases (COVID-19) Regulation 2021 here or an overview of commercial leasing changes here.


What about the landlords?

The federal government also offers relief for landlords. 

Through the Commercial Landlord Hardship Fund, eligible landlords who reduce rents of their impacted tenants can get up to a $3,000 monthly grant. 

Landlords can also choose to apply for a land tax relief for their commercial and residential properties. 

However, they cannot apply for both programs (that is, hardship fund and tax relief).


Let Us Help

If your business has a turnover of over $1 million, ABJ Solutions is offering a complimentary one-hour meeting to help answer questions and model critical decisions with you. Get in touch with us today so that we can help guide you through these challenging times.

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