Commercial Leases and COVID-19: NSW Update

As most everyone is probably aware (certainly if you have spoken to me, since I’ve spent most of the last month talking about nothing else!), in early April the Prime Minister announced the outcome of the National Cabinet deliberations on the effect of COVID-19 on the commercial leasing sector – a mandatory code of conduct for tenants and landlords (the “Code”).  More information on the Code can be found here: https://bedfordslegal.com.au/2020/04/08/covid19-leases/

We mentioned at the time it was announced that while the Code provided some much-needed clarity, it still needed to be implemented by separately by each of the States and Territories before it became enforceable.  On Friday, the NSW implementation of the Code was effected under the Retail and Other Commercial Leases (COVID-19) Regulation 2020.

How has the Code been Implemented?

While some of the key principles from the Code have been expressly included – such as the restrictions on termination and eviction – others have been implemented with reference to the Code itself.

For example, the Code includes leasing principles setting out the basis on which rental deferrals and waivers should be negotiated between landlords and tenants.  The NSW Regulation meanwhile states that the parties must renegotiate in good faith having regard to the economic impact of the pandemic and the leasing principles in the Code.

It therefore is not a case of simply being able to refer to the NSW Regulation for guidance on these matters – it will need to be read in conjunction with the Code.

What Information Can Landlords Require?

To qualify for the rental concessions, tenants must have:

  • qualified for the JobKeeper scheme; and
  • had turnover of less than $50 million in the 2018–2019 financial year.

As a result, one of the most common questions we have been asked over the last few weeks is: what evidence is required to demonstrate this, and what can landlords legitimately ask for to prove this?

In many cases, this question has been asked in response to onerous requests for information from landlords.  The Code was silent on this issue and the NSW Regulation does not add anything to that.  In the absence of specific guidance, it will be a matter of all parties acting reasonably and working together to find an amicable resolution.  Where that isn’t possible – either because the landlord is demanding excessive information, or the tenant is refusing to provide legitimately requested turnover information – the assistance of the dispute resolution mechanisms under the Regulation may be required.

If you want to read the regulation in full, it can be found on the NSW Legislation website at: https://www.legislation.nsw.gov.au/regulations/2020-175.pdf

If you have further questions or are uncertain about your lease at this time, please contact us ‑ we are here to help.