COVID-19 continues to impact and complicate our lives in many ways. One of the more recent changes by the NSW Government has been by way of further amendments to retail and commercial leasing. Our Property Team at SWS Lawyers have set out those changes below in order to continue to help our clients navigate this labyrinth.

As a result of the public health orders imposed in New South Wales, the government has amended and reignited regulations that relate to retail and commercial leasing. Both landlords and tenants need to be aware of these critical changes and how the regulations apply to their dealings.

The Retail and Other Commercial Leases (COVID-19) Regulation 2021 (Regulation) applies to impacted lessees during the prescribed period. The prescribed period is from 13 July 2021 until 13 January 2022.

If a lessee is an “impacted lessee” in accordance with the Regulation, they will be afforded certain protections such as:

a moratorium on their rent being increased during the prescribed period;
the requirement for landlords to renegotiate, in good faith, the rent and other terms of the lease; and
the landlord being prevented from taking action for prescribed breaches by the lessee, including claiming on a bank guarantee or security deposit.

Lessees must prove to landlords that they are an impacted lessee by providing a statement to that effect and providing evidence that they are an impacted lessee. To be an impacted lessee, the lessee must qualify for one of three government grants available due to the impact of the pandemic and have had an annual turnover of less than $50million in the 2020-2021 financial year.

Landlords should be aware of their obligations under the Regulation and the associated code of conduct, which include a requirement to provide proportionate reductions in rent payable, on a case-by-case basis, based on the reduction in the lessee’s trade. Rental waivers must constitute at least half the total rent reduction being provided by the landlord.

Eligible landlords may seek relief of their own, including land tax relief, if they provide rent relief to an impacted lessee.

Nothing in the Regulations prevents a landlord from taking prescribed action, such as terminating the lease, for grounds that are not related to the economic impacts of the COVID-19 pandemic.

The Regulations apply to both retail and commercial leases, but not to leases entered into on or after 26 June 2021.

If you would like to discuss the terms of your lease and how these Regulations may apply to you, contact our experienced property team at SWS Lawyers.

This article was co-written by Koreen Partridge, Associate in the Property & Planning Team.

COVID-19 Commercial Leasing Update for Landlords & Tenants in 2021