Commercial Leases and COVID-19: ACT 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 Monday, at long last, the ACT implementation of the Code was effected under the Leases (Commercial and Retail) COVID-19 Emergency Response Declaration 2020.

How has the Code been Implemented?

Interestingly, the ACT have taken a very different approach to NSW in the way it has implemented the Code.  Rather than confirm the entitlement of tenants to the concessions and protections expressed in the Code, the ACT approach instead simply requires landlords to engage in ‘good faith negotiations’ with tenants.  What this means is that, unlike in NSW, tenants cannot simply expect to receive concessions from their landlord as they are expressed in the Code.  Instead the concessions are a matter for negotiation.

So, what does ‘good faith negotiations mean?

I am glad you asked.  The ACT Declaration describes this as follows:

… a lessor engages in good faith negotiations with an impacted tenant if the lessor, in acknowledging the financial hardship suffered by the tenant because of the economic impact of the coronavirus disease 2019 (COVID-19), negotiates with the tenant having regard to the overarching principles and leasing principles set out in the code of conduct.

What this means in practice though is that landlords must acknowledge the difficulties that tenants are facing as a result of the pandemic and actually negotiate with tenants reasonably about how to get through this.  While those negotiations need to have regard to the principles in the Code – such as the rental waivers and deferrals I have talked about previously – they aren’t enforceable.

If you want to read the regulation in full, it can be found on the ACT Legislation website at: https://www.legislation.act.gov.au/View/di/2020-92/current/PDF/2020-92.PDF

You can also find more about the NSW implementation of the Code here: https://bedfordslegal.com.au/2020/04/29/commercial-leases-and-covid-19-nsw-update/.

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