COVID-19: Commercial Tenancies by States and Territories
In response to the Coronavirus pandemic, the Prime Minister announced on 7 April 2020 the introduction of a Mandatory Code of Conduct (“National Code”) for commercial tenancies. For more information regarding the National Code, please refer to our earlier article here. The National Code has been given effect in most states and territories through legislation and regulation.
We have summarised in this article the current status in each state and territory as at 28 May 2020.
To access the summary for a specific state or territory, click on the link below.
- NEW SOUTH WALES (NSW)
- QUEENSLAND (QLD)
- AUSTRALIAN CAPITAL TERRITORY (ACT)
- VICTORIA (VIC)
- NORTHERN TERRITORY (NT)
- SOUTH AUSTRALIA (SA)
- WESTERN AUSTRALIA (WA)
- TASMANIA (TAS)
The COVID-19 Legislation Amendment (Emergency Measures) Act 2020 (“NSW COVID Act”) was assented to on 25 March 2020. The NSW COVID Act provides regulation making powers with respect to residential and retail tenancies.
NSW has implemented the National Code through introduction of the Retail and Other Commercial Leases (COVID-19) Regulation 2020 (“NSW COVID Regulation”) which prohibits relevant landlords from taking certain actions against impacted tenants, including terminating leases due to a failure to pay rent or outgoings or failure to operate the business during the hours provided for in the lease. The NSW COVID Regulation also prohibits rent increases and requires landlords to negotiate rent in good faith and having regarding to the leasing principles set out in the National Code. Reductions in land tax and other statutory charges must be passed on to tenants.
The NSW COVID Regulation applies to tenants that qualify for JobKeeper, with a turnover of less than $50 million in 2018/19.
For a detailed review of the NSW COVID Regulation please click here to read our article published on 26 April 2020.
The COVID-19 Emergency Response Act 2020 (“QLD COVID Act”) was passed by Queensland Parliament on 23 April 2020 and will expire on 31 December 2020. The QLD COVID Act provides that regulations can be passed under the QLD COVID Act or the Retail Shop Leases Act 1994 (“Retail Leases Act”) in response to the COVID-19 emergency. A regulation made under Part 7, section 23 of the QLD COVID Act applies to a “relevant lease” being either a retail shop lease under the Retail Leases Act or a lease prescribed by regulation for the definition of relevant lease.
As the QLD COVID Act was passed after the Mandatory Code of Conduct (SME Commercial leasing principles during COVID-19) (“the Code”) came into effect, the regulation making power with respect to retail and other prescribed leases references the principles contained in the Code. The QLD COVID Act allows regulations to be made which:
- Prohibit Lessors from recovering possession of premises.
- Prohibit Lessors from terminating a relevant lease.
- Regulate or prevent the exercise or enforcement of another right of a Lessor under a relevant lease or other agreement relating to the premises.
- Exempt a Lessee (or class of Lessees) from the operation of a provision of an Act, relevant lese or other agreement relating to the leasing of premises.
- Require parties to a relevant lease to have regard to particular matters or principles, or a prescribed standard, code or other document, in negotiating or disputing a matter under or in relation to the relevant lease.
- Require mediators, conciliators, arbitrators, tribunals, courts or other decision-maker to have regard to particular matters or principles, or a prescribed standard, code or other document, in mediating, conciliating, hearing or deciding a matter or proceeding relating to a relevant lease.
- Provide for a dispute resolution process.
- Provide for a maximum penalty or not more than 20 penalty units for a contravention of the regulation.
Whilst the Queensland Government has enacted regulations with respect to residential tenancies and the State’s tenants, there has not yet been a regulation introduced in relation to retail and commercial leases.
*Please note that the same day after we had finalised this update (28 May 2020) the QLD Government published its Retail Shop Leases and Other Commercial Leases (COVID-19 Emergency Response) Regulation 2020 (Regulation). Click here to read our latest update.
In ACT the COVID-19 Emergency Response Act 2020 (“First ACT COVID Act”) was passed by the Legislative Assembly, was notified under the Legislation Act 2001 and became effective on 8 April 2020.
The First ACT COVID Act amends, amongst many other items of legislation, the Leases (Commercial and Retail) Act 2001 by introduction of a new Part 17 ‘COVID-19 emergency response’. Part 17 provides that the Minister may make a declaration to introduce measures relating to the enforcement and termination of commercial tenancies.
The intention is that declarations made by the Minister will apply for the duration of the COVID-19 pandemic. Declarations made will cease to function either the day the Public Health (Emergency) Declaration 2020 (No 1) (N12020-153) ends, including any extension of this (the declaration end date) or if the Minister considers the effect of COVID-19 justifies a later date, which is not later than 3 months from the day the declaration end date, that day.
Part 1.18 of the COVID-19 Emergency Response Legislation Amendment Act 2020 (“Second ACT COVID Act”) which was notified on 13 May 2020 sets out further amendments to the Leases (Commercial and Retail) Act 2001. Declarations made will now cease to function either on the first day no COVID-19 emergency is in force or if the Minister considers the effect of COVID-19 justifies a later date, which is not later than 3 months from the day the declaration end date, that day. Schedule 1, amendment [1.95] of the Second ACT COVID Act provides that the new Part 17 expires at the end of a 3-month period during which no COVID-19 emergency has been in force.
The ACT Government issued a media release (dated 8 April 2020) in which it was confirmed that Brendan Smyth has been appointed as the new COVID-19 Local Business Commissioner. Mr Smyth is responsible for working with commercial landlords and tenants to mediate mutually agreeable outcomes relating to changes to commercial lease arrangements.
On 11 May 2020, the Leases (Commercial and Retail) COVID-19 Emergency Response Declaration 2020 (ACT COVID Declaration) became effective. The ACT COVID Declaration implements the principles contained in the National Code and is focused heavily on creating an incentive for landlords and tenants to negotiate in good faith to reach mutually beneficial outcomes taking into account the current operating conditions and financial position of each party.
The ACT Government has issued guidance notes for tenants and landlords which sets out the ACT Government’s approach to implementing the National Code (ACT COVID Guidelines). The ACT COVID Guidelines are a useful resource for both landlords and tenants and can be found here. We note the ACT COVID Guidelines merely summarise the commercial tenancy laws and legal framework in the ACT relating to the COVID-19 pandemic. The ACT COVID Guidelines do not have the force of the law and the document is not intended to alter the interpretation of the ACT COVID Declaration.
On 23 April 2020, the Victorian Government introduced the COVID-19 Omnibus (Emergency Measures) Act 2020 (“VIC COVID Act”) which temporarily amends certain Acts, and temporarily empowers the making of regulations, to modify the application of the law of Victoria in certain respects for the purpose of responding to the COVID-19 pandemic.
Part 2.2 of the VIC COVID Act is headed “Regulations temporarily modifying law relating to retail leases and non-retail commercial leases and licences”. In addition to defining what constitutes an "eligible lease", the VIC COVID Act provides for:
- regulations to be made in respect of eligible leases, including regulating the rights and obligations of landlords and tenants; and
- the functions and powers of the Small Business Commission in relation to the connection to the VIC COVID Act and regulations made under it.
The provisions relating to eligible leases will be repealed (cease to have effect) in 6 months' time.
Retail leases and non-retail commercial leases or commercial licences may be considered "eligible leases". Non-retail commercial leases are defined as leases which include premises that are let for the sole or predominant purpose of carrying on a business at the premises.
An eligible lease under the VIC COVID Act applies to tenants that are suffering financial stress or hardship that:
- have an annual turnover of up to $50 million, and
- are an eligible business for the purpose of the Commonwealth Government’s JobKeeper program. For these tenants, assuming they are not charities, this means that the business has lost 30% or more of its revenue compared to a comparable period a year ago.
However, even if the above criteria is met, certain retail leases or non-retail commercial leases will not be an eligible lease, including where for example the tenant is a member of a group of entities and the aggregate turnover of the group exceeds a certain threshold amount.
The VIC COVID Act itself does not lay down substantive rules of law governing the practical issues experienced by landlords and tenants through the coronavirus pandemic, but merely provides for the passage of subsequent regulation dealing with those issues in relation to eligible leases.
The COVID-19 Omnibus (Emergency Measures) (Commercial Leases and Licences) Regulations 2020 (“VIC COVID Regulation”) became effective from 1 May 2020. The VIC COVID Regulation applies to leases affected by COVID-19 and implements the principles set out in the National Code. Under the VIC COVID Regulation, landlords and tenants must cooperate and act reasonably and in good faith in all discussions and actions associated with matters relating to COVID-19 and landlords must not evict or attempt to evict a tenant under an eligible lease and must not re-enter or otherwise recover the premises of an eligible lease.
Further, a tenant may request rent relief from the landlord and a landlord is required to offer rent relief to the tenant under an eligible lease within 14 days of receipt of the request or different time frame if agreed (noting such rent relief must be based on all circumstances of the eligible lease and must relate up to 100% of the rent payable and no less than 50% of the rent relief must be in the form a rent waiver).
On 28 April 2020, the Tenancies Legislation Amendment Act 2020 (“NT COVID Act”) was passed and received assent. The NT COVID Act includes amendments to the Business Tenancies (Fair Dealings) Act 2003. The NT COVID Act provides power to the Minister to regulate business premises or leases by publishing a modification notice in the Gazette. The NT COVID Act allows for future amendments to be made to tenancy laws, however does not give effect to any substantive changes to such laws.
Commercial tenants can request to the NT Government to receive rent relief in the form of payroll tax and utilities bills relief if they can demonstrate economic hardship. There is no land tax in NT.
Commercial landlords will qualify for payroll tax and utilities bill relief if they negotiate with tenants who have suffered hardship in good faith. The government will also waive the property activation levy for relevant landlords whose property becomes vacant due to the coronavirus (COVID-19) crisis.
Hardship is demonstrated if a business has an annual turnover of up to $50 million and suffered a reduction in turnover of at least 30% due to COVID-19 when compared to the same month or quarter in 2019. The Department of Trade, Business and Innovation will be keeping a Central Hardship Register for businesses, who can start applying for the following forms of relief 1 May 2020.
On 28 April 2020, a modification notice with respect to retail leases was made. During the COVID-19 emergency period, a landlord must not give a tenant a notice to terminate / quit unless the landlord has, for a period of at least 30 business days, made good faith efforts to negotiate with the tenant to allow the tenant to remain in the premises.
The COVID-19 Emergency Response Act 2020 (“SA COVID Act”) was assented to on 9 April 2020. Section 7 applies to commercial leases and prohibits (among other things) termination of a commercial lease if a tenant has failed to pay rent due to hardship resulting from COVID-19.
Section 7 of the SA COVID Act further provides that a landlord must not take a prescribed action in relation to a commercial lease during the prescribed period. Prescribed actions include eviction, repossession, termination, seizure of goods, charging interest on overdue rent or calling on security. Landlords are also prohibited from increasing the rent or seeking reimbursement for land tax from a tenant experiencing hardship due to COVID-19.
The COVID-19 Emergency Response (Commercial Leases No 2) Regulations 2020 (“SA COVID Regulation”) replaced the COVID-19 Emergency Response (Commercial Leases) Regulations 2020. The SA COVID Regulation sets out the temporary measures which apply to parties to certain commercial leases (affected by the COVID-19 pandemic) and introduces dispute resolution procedures for disputes relating to such leases.
The Commercial Tenancies (COVID-19 Response) Act 2020 (“WA COVID Act”) received assent on 23 April 2020. Part 3 of the WA COVID Act sets out the prohibited actions in relation to small commercial leases and related matters. Prohibited actions include:
- eviction of the tenant from the land or premises that are the subject of the small commercial lease;
- exercising a right of re-entry to the land or premises that are the subject of the small commercial lease;
- recovery of land;
- distraint of goods;
- termination of the small commercial lease;
- requiring a payment of interest on unpaid rent or on any other unpaid amount of money payable by the tenant to the landlord under the small commercial lease (including, without limitation, operating expenses); and
- recovery of the whole or part of any security for the performance of the tenant’s obligations under the small commercial lease (including, without limitation, a security bond).
Clause 11 of the WA COVID Act provides that Rent payable under a small commercial lease (other than rent or a component of rent determined by reference to turnover) cannot be increased during the emergency period.
Part 5 of the WA COVID Act contains the dispute resolution process. Dispute is defined to include a code of conduct dispute and a financial hardship dispute.
The COVID-19 Disease Emergency (Miscellaneous Provisions) Act 2020 (TAS) (“TAS COVID Act”) commenced on 27 March 2020. The Act provides broad heads of power for the Premier, the Treasurer and the Attorney-General, or delegated Ministers, to make declarations by public notice to adjust the operation of a range of statutory requirements.
On 9 April 2020, the Premier issued a Notice under section 22 (Provisions restricting rent increases or termination of commercial tenancies) of the Act. Under the Premier’s notice the following applies, if it is a tenant with a business turnover of less than $50 million and that business is also eligible for the Commonwealth Government’s JobKeeper program:
- a landlord cannot terminate a commercial lease for unpaid rent or other moneys; and
- a landlord cannot increase the rent. The only exception to this is for leases where rent payable is linked to the turnover of the tenant.
The above applies to any commercial lease that was in place as at 1 February 2020 or which commenced prior to 9 April 2020 and will be in place until at least 30 September 2020.
On 13 May 2020, the COVID-19 Disease Emergency (Commercial Leases) Act 2020 (“TAS Leasing COVID Act”) commenced. The TAS Leasing COVID Act gives effect to the National Code and is designed to govern the conduct of commercial tenants and landlords and provide additional protections and rent reductions for tenants experiencing financial hardship due to COVID-19.
The TAS Leasing COVID Act prohibits landlords from evicting tenants, taking possession or terminating a lease due to failure to pay rent. Further, landlord are prohibited from increasing rent during the financial hardship period and landlords and tenants are required to negotiate rent waivers or deferrals based on the commercial tenant’s reduced income due to COVID-19.
The changes are in effect for the ‘financial hardship period’ which is currently from 1 April 2020 until 30 September 2020 . This period may be extended.
If you have any questions or would like to discuss the treatment of commercial leases during the COVID-19 period, please do not hesitate to contact us.