On 24 April 2020 the NSW government introduced the Retail and Other Commercial Leases (COVID-19) Regulation 2020 [NSW]1 adopting the Mandatory Code of Conduct (Code) for Retail, Commercial & Industrial Leases.
The object of the Regulations are to:
(a) prohibit and regulate the exercise of certain rights of lessors relating to the enforcement of certain leases during the COVID-19 pandemic period, and
(b) require in response to the COVID-19 pandemic, that lessors and lessees renegotiate the rent and other terms of leases in good faith having regard to the leasing principles set out in the Code, before any legal enforcement action of the lease terms can becommenced.
Restrictions on taking prescribed action
If a lessee is an impacted lessee, a lessor must not take any prescribed action against the lessee on the grounds of a breach of the lease during the prescribed period consisting of a failure to pay rent or outgoings or the business not trading the hours specified in the lease.
A lessee is an impacted lessee if the lessee qualifies for the Jobkeeper scheme and their turnover in the 2018–2019 financial year was less than $50 million. Prescribed action means taking action under the provisions of a lease or seeking orders or issuing proceedings in a court or tribunal including for eviction of the lessee from premises, re-entry to premises, termination of the subject lease and any other remedy otherwise available to a lessor against a lessee. Prescribed period means from 24 April 2020 to 24 October 2020. The Regulations are repealed as at 25 October 2020.
Renegotiation of rent and other terms before prescribed action
A lessor must not unilaterally take or continue any prescribed action against an impacted lessee for breach of the lease for failure to pay rent during the prescribed period unless the lessor has complied with the requirements to renegotiate in good faith the rent payable under the lease and other terms of the lease. Regard must be had to the economic impacts of the COVID-19 pandemic and leasing principles set out in the Code.
If any dispute arises in respect of the renegotiations, the parties are required to attend mediation before the Small Business Commissioner. The Regulations do not prevent a lessor taking a prescribed action on grounds unrelated to the economic impacts of the COVID-19 pandemic. A tribunal and any court is to have regard to the leasing principles set out in the Code when considering whether to make a decision or order relating to recovery of possession of premises, the termination of a lease by a lessor and the exercise or enforcement of another right of alessor.
The impact of the application and enforcement of the Regulations remains to be seen.
The above was prepared for and is intended to provide a broad general overview of issues. It is not intended, and must not be relied upon, as definitive legal advice.
If you have any query, please feel free to contact Deren Hassan (firstname.lastname@example.org) 9265 3029 or your usual Eakin McCaffery Cox contact to discuss.
The Regulations are made separately, but in almost identical form, under the Retail Leases Act 1994 and by the Amendment of Conveyancing (General) Regulation 2018.