Navigating Leases and the COVID-19 Outbreak – Part 3

The COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (NSW) (“the NSW Act”) received royal assent on 25 March 2020, and provides for changes to be made to both retail and residential tenancy legislation.

We are paying attention to the NSW measures, as we expect something similar will follow shortly in Victoria.

The NSW Act will give the Minister the power to create emergency regulations to prevent the termination of leases during the COVID-19 crisis.

It is interesting to note that the NSW Act allows the creation of regulations that prevent the termination of leases for more than just the non-payment of rent.  It is presumed that landlords may also be prohibited from accessing bank guarantees or other types of security where a tenant is in default.

At this stage, the Regulations created under the NSW Act will expire in no later than six (6) months, or such earlier date as determined by the NSW Parliament.

The National Cabinet is scheduled to meet again later this week and have provided a set of Principles to assist commercial tenants.  The Principles include the following:

  • A short term, temporary moratorium on evictions for non-payment of rent across commercial tenancies impacted by severe rental distress due to COVID-19;
  • Tenants and landlords are encouraged to agree to rent relief or temporary amendments to their Leases;
  • The reduction or waiver of rental payments for a defined period for impacted tenants;
  • The ability for tenants to terminate their leases in certain circumstances and/or seek mediation or conciliation on the grounds of financial distress;
  • Commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by COVID-19;
  • Landlords and tenants not significantly affected by COVID-19 are expected to honour their leases and rental agreements; and
  • Cost sharing or deferral of losses between landlords and tenants, with Commonwealth, State and Territory Government and financial institutions to consider mechanisms to provide assistance.

On 1 April 2020, the Victorian Small Business Commissioner (the VSBC) called on tenants and landlords impacted by the COVID-19 crisis to commence negotiations without delay in respect to rental obligations under their lease.

The VSBC has also stated that they are closely monitoring the conduct of landlords to ensure that tenants are not unreasonably penalised during this time.

The VSBC can assist by investigating complaints and arranging mediation to resolve disputes if landlords and their tenants are unable to reach agreement.

If you require our assistance with the negotiations with your landlord or tenant, or to prepare a Deed of Variation of Lease, or to refer a dispute to the VSBC, please do not hesitate to contact any member of our leasing team.