Relief for some, but not all landlords

By Anna Masi & Youssef Abouelnasr

On 7 April 2020, the Government announced its National Code of Conduct in relation to commercial leases so that, under the Code, the economic impacts of the pandemic on lessors and lessees might be shared between them and lessees would be protected by the Code’s prohibition on the termination of commercial leases by the lessor on the ground of a breach of the lease that had only arisen for Covid-related reasons. In the Code’s application the rent ordinarily payable by the lessee was reduced in proportion to the fall in the lessee’s turnover.  The resulting amount of rent reduction was to be either deferred for payment to the lessor at a later time or waived altogether, or some combination of deferral and waiver.

In New South Wales the Code gave rise to the Retail and Other Commercial Leases (COVID-19) (“Regulation”).

The concessions under the Regulation only applied to “impacted lessees”.  An “impacted lessee” included any lessee who qualified for Jobkeeper.

The effect of the Regulation on lessors was not only the reduction of rents received from impacted lessees but – to the extent that rents were to be waived – a loss of those rents with no hope of their recovery.

Fast forward to 18 December 2020, and the third edition of the Regulation was published in line with the extension of its operation to 28 March 2021.

Non-Retail Leases

The Regulation as amended includes a significant change to its application and reach.

As of 1 January 2021, Non-Retail Leases are no longer covered by the Regulation. A Non- Retail Lease is a lease not referred to in Schedule 1 of the Retail Leases Act 1994. Generally, Non- Retail Leases are leases of premises for operations other than retail shops, such as professional offices, gyms and medical centres.

This means that after 1 January 2021, provided the lease is not a retail lease under Schedule 1 of the Retail Leases Act 1994 the lessor is entitled to enforce the lease as normal and take action for any breach of the lease such as non-payment of rent even if that lessee’s business is being impacted by Covid. (It is important to note that where the lessee was an “impacted lessee” under the Regulation prior to 1 January 2021 then any concession that accrued to the lessee under the Regulation before that date will be unaffected and will remain the entitlement of the lessee.)

Despite this significant change in the application of the Regulation which is now relevant only to retail leases, the name of the Regulation remains, somewhat misleadingly, the Retail and Other Commercial Leases (COVID-19) Regulation.

Hansons Lawyers advises both lessors and lessees across all retail and commercial leases, including agreements for lease and enforcement in the case of a breach of the lease terms.  We invite you to contact us to discuss your situation with our experienced Property & Commercial Law Team.